thus conclude that there are somewhat limited diversification opportunities available to US based
investor interested in investing in the ETFs of the large equity markets over the long run.
A number of potential implications emerge from our study. First, given the evidence that
iShares suggests a somewhat different degree of integration of G7 markets than is currently
known based on other indices there is clearly an issue regarding the microstructure of these
shares. The iShares data indicates that dependent on the time period over which one is measuring,
evidence in favour or against cointegration, and the diversification benefits which this implies,
may emerge. Second, the extent to which iShares track the existing integration measures may
also provide some evidence as to the real portfolio diversification benefits from holding iShares.
Third, following Alexander (1999) and Phengpis and Swanson (2004), information provided by
our cointegration tests using iShares can be used in future in designing efficient portfolios.
23
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