Integration of Emerging Stock Market and Developed Stock Market with Shares Included in MSCI Index
Abstract
The inclusion of an equity market in MSCI has been viewed to integrate the international equity markets. MSCI started to include China A-shares partially in MSCI Emerging Markets Index(IEM) and announced MSCI China A Inclusion Index (ICN) on May 31, 2018. As ICN included in IEM, China's stock market will be more closely linked to international equity markets. This study applies VECM and BEKK-GARCH to verify the integration of China and the global markets and analyzes the relationship between China stock market and the international stock market before and after ICN included in IEM. Meanwhile, gold can be used to reduce the risk of stock markets as widely used a safe haven asset or hedging tool because of the impact or fall caused by international events. Therefore, this study uses VaR to discuss the changes of risk while selecting gold futures into the portfolio and the results suggest thatgold futures can view as a hedging instrument in China's equity market. This study provides insights for the investors who want to participate and invest in the emerging markets .
