IIMS Journal of Management Science
Search
Dr. Anindita Chakraborty is working as an Assistant Professor in Institute of Management Studies at Banaras Hindu University, Varanasi, Uttar Pradesh, India. She can be reached at aninditachakraborty19@gmail.com
The relationships between international capital markets have become vital in recent times. Capital markets internationalisation provides prospects to the investors to invest their money in the country of their choice and free mobility of money. This paper is an attempt to study the inter-linkages between stock markets of India, United States, Switzerland, Singapore, Japan, Belgium, Hong Kong and Germany with which it has trading relationship. Descriptive statistics, unit-root test, Johansen co-integration test, Granger’s causality model and Vector Error Correction Model are applied to find out the linkages between the markets under study. The results revealed that the Indian stock market in the long run is not affected by the development of other stock markets, but in short run it got affected. There is also evidence that India has started exhibiting divergence from other developed economies because of dissimilar levels of development and growth. At the same time, if the equity markets are integrated, hedging and international diversification strategies will be less beneficial.
Financial integration, Developed market, Unit-root test, Johansen co-integration test, Granger’s causality model, Vector auto regression, Variance decomposition
JEL Classification: F18, F36, G15, O19
Bala, A. and Mukund, K.S. (2001). Interrelationship between Indian and US stock markets. Journal of Management Research, Vol. 1, No. 3 (May–August), pp. 141–148.
Bekaert, G. and Hodrick, R. (1992). Characterizing predictable components in excess returns on equity and foreign exchange markets. Journal of Finance, Vol. 47, pp 467–509.
Bhunia, A. (2012). Financial market integration: empirical evidence from India and select South Asian countries. Afro Asian Journal of Social Sciences, Vol. 3, No. 3.1, pp. 1–16.
Bora, A., Mandaci, P.E., Kopurluand, B.S. and Ersener, B. (2009). Behaviour of emerging stock markets in the global financial meltdown: evidence from BRIC-A. African Journal of Business Management, Vol. 3, No. 7, pp. 396–404.
Bose, S. (2005). Securities market regulations: lessons from US and Indian experience. The ICRA Bulletin Money & Finance, Vol. 2, No. 20–21, pp. 83–124.
Chi, J., Li, K. and Young, M. (2006). Financial integration in east Asian equity markets. Pacific Economic Review, Vol. 11, No. 4, pp. 513–526.
Choudhry, T., Lu, L. and Peng, K. (2007). Common stochastic trends among Far East stock prices: effects of the Asian financial crisis. International Review of Financial Analysis, Vol. 16, pp. 242–261.
Giannetti, M., Guiso, L.J., Padula, T. and Pagano, M. (2002). Financial market integration, corporate financing and economic growth. European Economy. Economic Papers No. 179.
Golaka, C.N. (2003). Behaviour of Stock Market Volatility after Derivatives. NSE Working Paper, Retrieved from http://www.nse-india.com/content/press/ nov2003a.pdf on 3/3/15.
Gupta, N. and Agarwal, V. (2011). Comparative study of distribution of Indian stock market with other Asian markets. International Journal of Enterprise Computing and Business Systems, Vol. 1, No. 2, pp. 1–20.
Latif, S., Ahsan Rizvi, S.M, Mubin, M. and Iqbal, N. (2014). Financial market integration: empirical evidence from the economic cooperation of India and Pakistan. Journal of Economics and Sustainable Development, Vol. 5, No. 3, pp. 100–110.
Leong, S.C. and Felmingham, B. (2001). The interdependence of share markets in the developed economies of East Asia. Pacific-Basin Finance Journal, Vol. 11, pp. 219–237.
Madan, P. (2013). Financial integration of Indian stock markets with US and UK stock markets. Research Journal of Economics and Business Studies, Vol. 3, No. 2, pp. 54–64.
Mohan, R. (2005). Globalisation, financial markets and the operation of monetary policy in India. BIS Papers No. 23. www.bis.org/publ/bppdf/bispap23m.pdf. Accessed on 10 June 2014.
Narayan, P., Smyth, R. and Nandha, M. (2004). Interdependence and dynamic linkages between the emerging stock markets of South Asia. Accounting and Finance, Vol. 44, No. 3, pp. 419–439.
Nath, G.C. and Verma, S. (2003). Study of common stochastic trend and co-integration in the emerging markets: a case study of India, Singapore and Taiwan. Research Paper. NSE India.
Phylaktis, K. and Ravazzolo, F. (2005). Stock market linkages in emerging markets: implications for international portfolio diversification. Journal of International Financial Markets, Institutions & Money, Vol. 15, No. 2, pp. 91–106.
Raj, J. and Dhal, S. (2008). Integration of India’s stock market with global and major regional markets. BIS Paper No. 42.
Reddy, Y.V. (2003). The global economy and financial markets: outlook, risks and policy responses. RBI Bulletin, October, 2003.
Singh, G. and Singh, P. (2010). Chinese and Indian stock market linkages with developed stock markets. Asian Journal of Finance & Accounting, Vol. 2, No. 2, pp. 21–39.
Singh, S. and Sharma, G.D. (2012). Inter-link ages between stock exchanges: a study of BRIC nations. International Journal of Marketing, Financial Services & Management Research, Vol. 1, No. 3, pp. 1–17.
Subha, M.V. and Nambi, S.T. (2010). A study on co-integration between Indian and American stock markets. Retrieved from psgim.ac.in/journals/index.php/jcrm/article/viewFile/97/103 on 23/4/15.
Trichet, J.C. (2006). The process of European financial integration: where do we stand? Retrieved from http:// www.ecb.europa.eu/press/key/date/2006/html/sp060113.en.html on 10/06/14.
Wong, W.K., Agarwal, A. and Du, J. (2005). Financial integration for Indian stock market: a fractional cointegration approach. Working Paper No. 0501. Department of Economics, National University of Singapore.
Zulkefly, A.K. and Bakri, A.K. (2008). Stock market integration: Malaysia and its major trading partners. MPRA Paper 26976. University Library of Munich, Germany
