Summary for research Essay Example | Topics and Well Written Essays - 2500 words

Summary for research - Essay Example For empirical analysis there were used both daily and weekly closing stock price indices for the four sectors of the Qatar Exchange for the period from January, 2008 to April, 2011. The results of the study based on the Johansen’s multivariate cointegration analysis have shown that all four sector indices had interrelationships in a long-term equilibrium. The findings based on the Granger’s causality analysis have shown that Banking and Financial Institutions sector had significant impact on the price predictability in the other sectors in the short-run, while Services sector had much lower impact. The analysis based on the findings of the generalized forecast error variance decomposition has shown that the Services and Insurance sectors appeared to be the most endogenous sectors while both the Industrial and the Banking and Financial Institutions sectors were the most exogenous sectors (Walid, 2012). Both individual and institutional investors usually try to diversify their portfolios in order to minimize the risks and to generate most efficient outcomes and/or expected returns. There are recognized two major strategies under portfolio diversification: cross-market investment to in different classes of assets or sectors and global diversification of portfolio by investing across both domestic and foreign assets. However, it is worth to mention that in order to create a well-diversified asset portfolio, prospective investors should take into consideration the fact of interdependence structure of financial markets (Walid, 2012). There were carried out many empirical researches, which provided evidence of interdependencies of international financial markets as a result of globalization and increased level of integration. However, it is also important to understand the nature of interdependence structure amongst different sectors in a specific country, because it can provide prospec tive and