The focal objective of this study is to analyze and explore the Co-movement of Pakistan stock market (KSE-100) with the stock market of developed countries (US, UK, Canada, Australia, Germany, Japan, France and Neither land) which have portfolio investment in Pakistan by applying co-integration approach using Johansen and Juselius multivariate and bi-variate co-integration. Secondary data of stock indices of these equity markets covering the period from 1 st July 2007 to June 2014 has been used. Analysis of study reveals that Pakistan stock market (KSE-100) is not co moved with any stock market of selected major developed countries. Non-existence of co-movement of KSE offers the investors and fund managers to get the diversification benefits by portfolio investment in KSE. This study will help the investors in searching such markets which have greater diversification benefits because diversification minimizes the risk element. Investors and policy makers can make efficient portfolio investment decisions by studying these analyses. This Study provides awareness and guideline to decision makers including local and foreign investors, agencies, financial analysts and banks about diversification opportunities in equity market of Pakistan.
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