international stock market (4)

In addition ,a force that may generate a common trend movement of stock price indexes across countries is the phenomenon of international portfolio diversification to reduce risk in investors portfolio .If the price changes are not highly correlated with each other across countries ,there is an advantages to holding stocks in several countries because a rise (fall) in other markets.Because many investors are risk averse ,the purchase of stock in several markets will reduce the likelihood of wide swings in total portfolio value ,Indeed mutual funds with reduce the likelihood of wide swings in total portfolio value .Indeed ,mutual funds with global scope are doing precisely this type of diversified investing .but if portfolio become diversified across international markets and if some balance between the stocks a cross the various markets is maintained over time as portfolio grow,then the markets may well move in somewhat parallel fashion.