ABSTRACT
The Pacific Basin has become one of the world’s more important centres for the export of consumer products that reflect increasingly sophisticated technologies. The rising importance of the Asia-Pacific region in the world economy is becoming a widely accepted fact. Trade between the United States and the Pacific Rim countries has surpassed trade between the United States and the European Economic Community since the beginning of the 1980s. Modern portfolio theory suggests that an investor can improve risk-adjusted return performance by holding an internationally diversified portfolio of securities. Most studies of relationships among international equity markets have focused on markets in the developed countries. Risk reduction with international equity investments depends on the correlations between returns in various countries. The advantages of international diversification depend on the degree of independence between various national economies and their stock price behaviour. Diversification within the Asia-Pacific region can also be very beneficial for investors in the countries of the region.
