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Integration of Indian Stock Market with Other Markets in the Asia-Pacific Region

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  • P Srikanth

Abstract

This paper aims to explore the link between the Indian stock market and other selected stock markets in the Asia-Pacific region. Using the monthly data from January 2000 to December 2010, the stock market indices of India (SENSEX), Hong Kong (HSI), Indonesia (JKSE), Malaysia (KLSE), South Korea (KOSPI), Japan (Nikkei 225) and China (SSEC) are examined. Augmented Dickey-Fuller unit root test is performed to check for stationarity, and it is found that all the natural logarithmic values of series are stationary at their level form. Johansen and Juselius cointegration analysis suggests that Indian stock market is integrated with other stock markets in the Asia-Pacific region and there exists a long-term relationship between these markets. By implementing the Vector Error Correction Model (VECM), the short-term dynamics of the Indian stock market to the long-run equilibrium is studied and the results reveal that the short-term distortion to long-term equilibrium is around 25%. Variance decomposition results reveal that the impact of other Asia-Pacific region stock markets on Indian stock market was mild in the first two months, and from the third to fifth month, there was much increase in the contribution of the other selected markets to the variance in Indian stock market.

Suggested Citation

  • P Srikanth, 2012. "Integration of Indian Stock Market with Other Markets in the Asia-Pacific Region," The IUP Journal of Financial Economics, IUP Publications, vol. 0(1), pages 18-32, March.
    • Handle: RePEc:icf:icfjfe:v:10:y:2012:i:1:p:18-32
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    Cited by:

    1. Ronit Mukherji, 2015. "Stock Market Efficiency in Developing Economies," Margin: The Journal of Applied Economic Research, National Council of Applied Economic Research, vol. 9(4), pages 402-429, November.
    2. Dr. Muhammad Rizwan Kamran & Lubna Nasar & Saima Khurshid & Aisha Saleem, 2023. "Valuing Integration In Asian Stock Markets: A Comparative Study Of Pre And Post-Covid-19 Periods," Bulletin of Business and Economics (BBE), Research Foundation for Humanity (RFH), vol. 12(2), pages 126-132.

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