does correlation of emerging market return and developed market return increases due to market liberation?
does correlation of emerging market return and developed market return increases due to market integration?
if that is the case, emerging market debt may no be used in diversification due to market liberation, is it true?
As correlation between developed and developing increases, the diversification bebefit reduces. However correl would be lower compared to domestic investments. So still providing a diversification benefit
yes, it should theoretically unless the liberalized market is delayed in becoming integrated
yes, correlations are measured by covariances rather than variances
EMD can still be used because the evidence shows that the diversification benefits are not as reduced as they would be expected to be
Internation bonds can be good diversifiers even if integration is at 100%. That is because countries have different fiscal and monetary policies, and their bonds will react differently to the policies of the domestic country.
so which one has higher impact on correlation, integration or liberalization?