WEBS, SPDRs, and country funds: an analysis of international cointegration

Price discovery and informational efficiency of international iShares funds

“…Bodurtha et al (1995), Froot and Dabora (1999), and Chan et al (2003) find that trade prices could be influenced by location of trade, presenting a high correlation with the U.S. market. Consistent with Bonser-Neal et al (1990), Patro (2001), Olienyk et al (1999) and Pennathur et al (2002), the more world markets are integrated, the higher the correlation between international and U.S. iShares, and the lower the benefit derived from diversification. Klibanoff et al (1998) analyze price and net asset value data on 39 single country closedend funds traded and listed in the United States from January 1986 to March 1994.…”

“…Studies that analyze diversification benefits of international investments include Bonser-Neal et al (1990), Patro (2001), Olienyk et al (1999), Pennathur et al (2002), Bodurtha et al (1995), Froot and Dabora (1999), and Chan, Hameed, and Lau (2003). Overall these studies explain that diversification benefits are limited.…”

“…They find that international markets become more integrated as international investment restrictions are dropped. Olienyk et al (1999) analyze the long-term relationship between eighteen World Equity Benchmark Shares (WEBS) and their related closedend country funds. They find a long-run relationship between the WEBS and the related closedend country funds as well as between different country WEBS, suggesting that international diversification benefits are limited.…”

Liquidity commonality and spillover in the US and Japanese markets: an intraday analysis using exchange-traded funds

“…Further evidence of global market integration is provided by Olienyk et al (1999) and Pennathur et al (2002). Both studies document that the stocks of non-US assets behave like US stocks and do not provide significant additional diversification.…”

“…This created several problems, including issues related to fluctuating foreign exchange rates and non-synchronous trading. As described by Olienyk et al (1999), exchange-traded funds such as the SPY and EWJ help to address these issues effectively for two reasons. First, they are both traded contemporaneously in the US market.…”