Journal of Management Research

Open Access Open Access  Restricted Access Subscription Access
Open Access Open Access Open Access  Restricted Access Restricted Access Subscription Access

Interrelationship between Indian and us Stock Markets


Affiliations
1 Indiana University - Northwest USA
2 School of Business Administration Penn State, Harrisburg, USA
     

   Subscribe/Renew Journal


This study examines the nature and extent of linkage between the US and the Indian stock markets. The study uses the theory of cointegration to study interdependence between the Bombay stock exchange (BSE), and the NYSE and Nasdaq. The sample data consisted of daily closing prices for the three indices from January 1991 through December 1999 with 2338 observations. The results are in support of the intuitive hypothesis that the Indian stock market was not interrelated to the US markets for the entire sample period. It should be noted that stock markets of many countries became increasingly interdependent with the US stock markets during the same time period. India was late in effecting liberalization policies and when it implanted these policies it did so in a careful and slow manner. However, as the effects of economic liberalizations started to take place, the BSE became more integrated with the Nasdaq and the NYSE, particularly after 1998. It must be noted that though BSE stock market is integrated with the US stock markets, it does not influence the Nasdaq and NYSE markets. This result is to be expected, given the relatively small valuation of the BSE.

Keywords

Stock Market Linkages, Stock Market Interdependence, Interrelationship Between Indian And us Stock Markets
User
Notifications

  • Aggarwal, R. and R. Leal (1996), “Integration and Anomalies in the Emerging Markets of Asia and Latin America,” in J.Doukas and L. Lang (Eds), Research in International Business and Finance, Jai Press, Inc.

  • Arshanapalli, B. and J. Doukas (1993), “International Stock Market Linkages: Evidence from Pre and Post-October 1987 Period,” Journal of Banking and Finance 17: 193-208.

  • Dickey, D. A. and W. A. Fuller (1979), “Distribution of the Estimates for Autoregressive Time Series with a Unit Root,” Journal of the American Statistical Association 24 (June): 427-31.

  • Dickey, D. A. and W. A. Fuller (1981), “Likelihood Ratio Statistics for Autoregressive Time Series with a Unit Root,” Econometrica 49 (July): 1057-1072.

  • Engle, R. F. and C. W. J. Granger (1987), “Cointegration and Error-Correction: Representation, Estimation and Testing,” Econometrica 55: 251-276.

  • Eun, C. S. and S. Shim (1989), “International Transmission of Stock Market Movements,” Journal of Financial and Quantitative Analysis 24 (June): 241-256.

  • Friedman, J. and Y. Shachmurove (1995), “Dynamic Linkages Among European Stock Markets,” in J. Doukas (Ed), Advances in International Stock Market Relationships and Interactions, Greenwood Publishing.

  • Granger, C. W. J. (1969), “Investigating Casual Relations by Econometric Models and Cross Spectral Methods,” Econometrica 37 (May): 424-438.

  • Granger, C. W. J. (1983), “Forecasting White Noise,” Applied Time Series Analysis of Economic Data, Bureau of the Census, Washington, DC.

  • Grubel, H. G. (1968), “Internationally Diversified Portfolios,” American Economic Review 58 (September): 1299-1314.

  • Hilliard, J. E. (1979), “The Relationship Between Equity Indices on World Exchanges,” Journal of Finance 34 (March): 103-114.

  • Jaffe, J. and R. Westerfield (1985), “The Weekend Effect in Common Stock Returns: The International Evidence,” Journal of Finance 40 (June): 433-454.

  • Johansen, S. (1991), “Estimation and Hypothesis Testing of Cointegration Vectors in Gaussian Vector Autoregressive Models,” Econometrica 59: 1551-1580.

  • Kulkarni, M. (1996), “Stock Market Linkages Between the United States and Southern European Countries,” in J. Doukas and L. Lang (Eds), Research in International Business and Finance, Jai Press, Inc.

  • Levy, H. and M. Sarnat (1970), “International Diversification of Investment Portfolio,” American Economic Review 60: 668-675.

  • Lessard, D. R. (1973), “International Portfolio Diversification: A Multivariate Analysis for a Group of Latin American Countries,” Journal of Finance 28: 619-633.

  • MacKinnon, J.G. (1991), “Critical Values for Cointegration Tests,” in R.F. Engle and C.W.J. Granger (Eds), Long-run Economic Relationships: Readings in Cointegration, Oxford University Press.


Abstract Views: 344

PDF Views: 3




  • Interrelationship between Indian and us Stock Markets

Abstract Views: 344  |  PDF Views: 3

Authors

Bala Arshanapalli
Indiana University - Northwest USA
Mukund S. Kulkarni
School of Business Administration Penn State, Harrisburg, USA

Abstract


This study examines the nature and extent of linkage between the US and the Indian stock markets. The study uses the theory of cointegration to study interdependence between the Bombay stock exchange (BSE), and the NYSE and Nasdaq. The sample data consisted of daily closing prices for the three indices from January 1991 through December 1999 with 2338 observations. The results are in support of the intuitive hypothesis that the Indian stock market was not interrelated to the US markets for the entire sample period. It should be noted that stock markets of many countries became increasingly interdependent with the US stock markets during the same time period. India was late in effecting liberalization policies and when it implanted these policies it did so in a careful and slow manner. However, as the effects of economic liberalizations started to take place, the BSE became more integrated with the Nasdaq and the NYSE, particularly after 1998. It must be noted that though BSE stock market is integrated with the US stock markets, it does not influence the Nasdaq and NYSE markets. This result is to be expected, given the relatively small valuation of the BSE.

Keywords


Stock Market Linkages, Stock Market Interdependence, Interrelationship Between Indian And us Stock Markets

References