By Ricardo Coelho, Claire G. Gilmore, Brian Lucey, Peter Richmond, Stefan Hutzler (
source)
Over the period studied, 1997-2006, the tree shows a tendency to become more compact. This implies that global equity markets are increasingly interrelated. The consequence for global investors is a potential reduction of the benefits of international portfolio diversification.
Developed European markets are at the global centre. Since 2000, France is central node of European markets (used to be Germany before 2000). US links a cluster of North American and South American countries (except Peru) to France, via Germany. Interestingly, US market dominates globally in market value, but has only a loose linkage to other markets. Japan only became linked to other Asian markets since 2001, before that it was more linked to Western markets. South Africa, Turkey and Russia cluster emerged in 2000 and stays reasonable stable since then.
| Legend: | Europe | grey circles | |
| North America | white diamonds | ||
| South America | grey squares | ||
| Asia-Pacific | black triangles | ||
| Other | white squares |