Can a proxy for international investor sentiment towards emerging markets be identified?

Includes bibliographical references.International portfolio diversification is an area of popular academic interest. Most of the research is based on linkages between developed markets or between developed markets and emerging markets. Emerging markets have only been a feature of research for periods of crisis and contagion such as the emerging market crisis of 1997 and 1998. The common argument used to explain the cause of the stock market linkages is based on economic slowdowns (or deep-recession), large balance of payment problems or other macro-economic problems in the emerging markets. Contagion or herding behaviour is an alternative explanation to the cause of the co-movement of emerging markets. Contagion or Herding behaviour is based on the assumption that it is too costly to acquire information. Investors thus remain uninformed in the countries in which they invest. Investors try to infer future movements in one market based on how the rest of the market is reacting. The uniformed investors follow the supposedly informed investor. These information frictions can make investors follow the market, rather than take the time and expense to make their own assessments about the market fundamentals. This research aims to identify countries that are regarded as similar by international investors. Countries that are regarded as similar can be grouped together to form separate clusters. This research attempts to ascertain as whether there has been any change of perceptions since the emerging market crisis of 1997 and 1998, hence any change in the composition of above-mentioned clusters