This study investigates the dynamic inter-linkages among important emerging equity markets of the Organization of Islamic Countries (OIC) for the period 2000-2007 through multivariate co-integration analysis. It focuses on the “big five” emerging markets namely Pakistan, Indonesia, Malaysia, Turkey and Egypt. The Johansen and Juselius multivariate Co-integration analysis indicates presence of a long run relationship among these equity markets. The Bi-Variate Co-integration analysis confirms the result that the Karachi stock market is not co-integrated with equity markets of the emerging economies of OIC. However, the Turkish stock exchange is found to be integrated with Indonesian and Egyptian stock markets. Granger causality test reports the presence of lead lag relationship among Turkish, Indonesian and Malaysian markets. This may be a result of high foreign capital mobility among these markets. Innovative Accounting Approach also indicates that the Karachi stock market is in general independent as most of its shocks are explained by its own innovations. Therefore, funds managers of Indonesia, Malaysia, Turkey and Egypt can get the benefits of portfolio diversification by investing in the Karachi stock market.
