INTER-LINKAGES BETWEEN INDIAN AND MAJOR EQUITY MARKETS - IMPACT OF GLOBAL FINANCIAL CRISIS
This paper examined the short and long run correlating, causal and co-integrating relationship between Indian and other major developed [Australia, Canada, France, Germany, Japan, United Kingdom (UK) and United States of America (USA)] and developing [Argentina, Brazil, China, Mexico, Russia, and So...
| Main Authors: | , |
|---|---|
| Format: | Article |
| Language: | English |
| Published: |
Ramanujan College, University of Delhi, Delhi, India
2016-07-01
|
| Series: | Ramanujan International Journal of Business and Research |
| Subjects: | |
| Online Access: | https://rijbr.in/1/article/view/152/152 |
| _version_ | 1797665307104378880 |
|---|---|
| author | Dr. K. Latha Mr. Arnav Kumar |
| author_facet | Dr. K. Latha Mr. Arnav Kumar |
| author_sort | Dr. K. Latha |
| collection | DOAJ |
| description | This paper examined the short and long run correlating, causal and co-integrating relationship between Indian and other major developed [Australia, Canada, France, Germany, Japan, United Kingdom (UK) and United States of America (USA)] and developing [Argentina, Brazil, China, Mexico, Russia, and South Africa (SA)] markets for the period from April 2003 to December 2014 which was further subdivided in two sub periods: a Pre-crisis period (April 2003 to August 2007) and a Post-crisis period (August 2007 to December 2014). We applied correlation analysis, short and long run granger causality and Johansen Co-integration techniques on the monthly adjusted closing indices values of representative market indices.
Overall, results show that India had high correlating, causal and co-integrating relationship with Brazil, China, Russia and South Africa from the developing block and with Australia and Canada amongst the developed economies. This could be due to large bi-lateral trade and/or close political and cultural ties between these countries like the official BRICS group. Also, while the correlations significantly reduce post crisis, causal and co-integrating relationships increase post crisis. So, the nature of relationship between these markets has shifted from being contemporaneous to more of lead-lag nature. Thus, we find evidence for increase in contagion post crisis.
This has important implications for all stakeholders. Policy makers and stock market regulators need to be vigilant and take steps to insulate domestic markets as crisis is evidenced to greatly accentuate contagion. Investors can work out possible arbitrage opportunities as we find evidence of several lead-lag relationships among these markets. International investors can breathe easy regarding their international portfolio diversification as we find support for declining correlations among these markets. |
| first_indexed | 2024-03-11T19:42:04Z |
| format | Article |
| id | doaj.art-fd98f6982fc14f7bbc267aa590440289 |
| institution | Directory Open Access Journal |
| issn | 2455-5959 2583-0171 |
| language | English |
| last_indexed | 2024-03-11T19:42:04Z |
| publishDate | 2016-07-01 |
| publisher | Ramanujan College, University of Delhi, Delhi, India |
| record_format | Article |
| series | Ramanujan International Journal of Business and Research |
| spelling | doaj.art-fd98f6982fc14f7bbc267aa5904402892023-10-06T08:13:54ZengRamanujan College, University of Delhi, Delhi, IndiaRamanujan International Journal of Business and Research2455-59592583-01712016-07-0111115https://doi.org/10.51245/rijbr.v1i1.2016.152INTER-LINKAGES BETWEEN INDIAN AND MAJOR EQUITY MARKETS - IMPACT OF GLOBAL FINANCIAL CRISISDr. K. Latha0Mr. Arnav Kumar1Department of Commerce, Ramanujan College, University of DelhiDepartment of Commerce, Delhi School of Economics, University of DelhiThis paper examined the short and long run correlating, causal and co-integrating relationship between Indian and other major developed [Australia, Canada, France, Germany, Japan, United Kingdom (UK) and United States of America (USA)] and developing [Argentina, Brazil, China, Mexico, Russia, and South Africa (SA)] markets for the period from April 2003 to December 2014 which was further subdivided in two sub periods: a Pre-crisis period (April 2003 to August 2007) and a Post-crisis period (August 2007 to December 2014). We applied correlation analysis, short and long run granger causality and Johansen Co-integration techniques on the monthly adjusted closing indices values of representative market indices. Overall, results show that India had high correlating, causal and co-integrating relationship with Brazil, China, Russia and South Africa from the developing block and with Australia and Canada amongst the developed economies. This could be due to large bi-lateral trade and/or close political and cultural ties between these countries like the official BRICS group. Also, while the correlations significantly reduce post crisis, causal and co-integrating relationships increase post crisis. So, the nature of relationship between these markets has shifted from being contemporaneous to more of lead-lag nature. Thus, we find evidence for increase in contagion post crisis. This has important implications for all stakeholders. Policy makers and stock market regulators need to be vigilant and take steps to insulate domestic markets as crisis is evidenced to greatly accentuate contagion. Investors can work out possible arbitrage opportunities as we find evidence of several lead-lag relationships among these markets. International investors can breathe easy regarding their international portfolio diversification as we find support for declining correlations among these markets.https://rijbr.in/1/article/view/152/152stock market inter - linkagesglobal financial crisisshort and long run causalitycointegration |
| spellingShingle | Dr. K. Latha Mr. Arnav Kumar INTER-LINKAGES BETWEEN INDIAN AND MAJOR EQUITY MARKETS - IMPACT OF GLOBAL FINANCIAL CRISIS Ramanujan International Journal of Business and Research stock market inter - linkages global financial crisis short and long run causality cointegration |
| title | INTER-LINKAGES BETWEEN INDIAN AND MAJOR EQUITY MARKETS - IMPACT OF GLOBAL FINANCIAL CRISIS |
| title_full | INTER-LINKAGES BETWEEN INDIAN AND MAJOR EQUITY MARKETS - IMPACT OF GLOBAL FINANCIAL CRISIS |
| title_fullStr | INTER-LINKAGES BETWEEN INDIAN AND MAJOR EQUITY MARKETS - IMPACT OF GLOBAL FINANCIAL CRISIS |
| title_full_unstemmed | INTER-LINKAGES BETWEEN INDIAN AND MAJOR EQUITY MARKETS - IMPACT OF GLOBAL FINANCIAL CRISIS |
| title_short | INTER-LINKAGES BETWEEN INDIAN AND MAJOR EQUITY MARKETS - IMPACT OF GLOBAL FINANCIAL CRISIS |
| title_sort | inter linkages between indian and major equity markets impact of global financial crisis |
| topic | stock market inter - linkages global financial crisis short and long run causality cointegration |
| url | https://rijbr.in/1/article/view/152/152 |
| work_keys_str_mv | AT drklatha interlinkagesbetweenindianandmajorequitymarketsimpactofglobalfinancialcrisis AT mrarnavkumar interlinkagesbetweenindianandmajorequitymarketsimpactofglobalfinancialcrisis |