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The purpose of this paper is to investigate the stability of the long‐run relationships between emerging (India, China, South Korea, and Taiwan) and developed stock markets (USA and Japan). The study aims at adding to the literature on market integration by investigating the hypothesis that the Asian emerging stock markets are increasingly converging with the US stock market over time.

The authors use time varying cointegration tests (rolling and recursive cointegration) which allow for time variation in the underlying data generating process (possible structural breaks in the long‐run relationships). Ten year index data from mid 1998 to 2008 of the respective stock markets have been used for this study.

Empirical findings support the presence of one long‐run relationship (cointegration vector) between emerging and developed stock markets. Both domestic and external forces affect stock market behavior, leading to long‐run equilibrium but the individual Asian emerging stock markets tend to display stronger linkages with the USA (developed counterpart) rather than with their neighbors. The degree of convergence among Asian emerging markets has increased over the last few years.

This is the first paper to study cointegration among Asian emerging stock markets namely India, China, South Korea, and Taiwan, as well as their cointegration with the developed stock markets of the USA and Japan.