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We examine, through application of wavelet coherency, the co‐movement of European frontier stock markets with the USA and developed markets in Europe. We find that the strength of co‐movement varies considerably across the frontier markets, at different frequencies (time horizons), and over time. Co‐movement is relatively weaker for the frontier markets of Central and Southeastern Europe than in the Baltic region. Of the markets examined, Slovakia in particular shows low dependence, whereas Lithuania seems to be the most dependent market. Co‐movement is stronger at lower frequencies (longer horizons) and increases during the turbulent period of the global financial crisis of 2008/2009. We identify several macroeconomic factors related to variations in co‐movement at different time frequencies.

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We utilize wavelet coherency methodology with simulated confidence bounds to examine the short-term and long-term dependencies of the returns for S&P 500 and the S&P GSCI ® commodity index. Our results indicate no evidence of co-movement between S&P 500 total return and the S&P GSCI ® commodity index total return in the short term, thereby suggesting diversification gains for equity investors. Importantly, this finding encompasses the onset of the current financial crisis. However, long-term diversification benefits, particularly after the onset of the recent financial crisis, are limited. We find, moreover, no consistent evidence of co-movements between S&P 500 and 10 individual sub-indexes of the S&P GSCI ® commodity index. Of particular importance, we report weak co-movement of returns between S&P 500 and S&P GSCI ® Precious Metals total return and S&P 500 and S&P GSCI ® Softs at all frequencies, implying significant diversification gains both for short-term and long-term investors.