IDEAS home Printed from https://ideas.repec.org/a/pal/assmgt/v21y2020i4d10.1057_s41260-020-00165-2.html
   My bibliography  Save this article

International linkages of Indian equity market: evidence from panel co-integration approach

Author

Listed:
  • Sangita Choudhary

    (BML Munjal University)

  • Shelly Singhal

    (Chitkara University)

Abstract

The present study explores the linkages among Indian and six international stock market indices. High-frequency data (5 min) for a period of 1 year (June 2017–May 2018) are taken into account to assess short-term and/or long-term co-movement among seven world indices, namely NIFTY, DAX, DOW, CAC, EUROSTOXX, FTSE and S&P. The panel unit root test, panel co-integration test and panel Granger causality test are used to determine the association among selected markets. Results of the study provide evidence of significant co-integration among stock market indices in different countries. In the short term, the Indian stock market index is found to possess bidirectional causality with the US stock market indices, namely DOW and S&P. Additionally, no lead–lag relationship is found between NIFTY and the European stock market index. Findings of the study have important implications for investors, fund managers and portfolio investors.

Suggested Citation

  • Sangita Choudhary & Shelly Singhal, 2020. "International linkages of Indian equity market: evidence from panel co-integration approach," Journal of Asset Management, Palgrave Macmillan, vol. 21(4), pages 333-341, July.
    • Handle: RePEc:pal:assmgt:v:21:y:2020:i:4:d:10.1057_s41260-020-00165-2
    DOI: 10.1057/s41260-020-00165-2
    as

    Download full text from publisher

    File URL: http://link.springer.com/10.1057/s41260-020-00165-2
    File Function: Abstract
    Download Restriction: Access to the full text of the articles in this series is restricted.
    File URL: https://libkey.io/10.1057/s41260-020-00165-2?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Campbell, John Y & Hamao, Yasushi, 1992. "Predictable Stock Returns in the United States and Japan: A Study of Long-Term Capital Market Integration," Journal of Finance, American Finance Association, vol. 47(1), pages 43-69, March.
    2. Wu, Chunchi & Su, Youg-Chern, 1998. "Dynamic relations among international stock markets," International Review of Economics & Finance, Elsevier, vol. 7(1), pages 63-84.
    3. Andrew Ang & Geert Bekaert, 2002. "International Asset Allocation With Regime Shifts," The Review of Financial Studies, Society for Financial Studies, vol. 15(4), pages 1137-1187.
    4. Pedroni, Peter, 2004. "Panel Cointegration: Asymptotic And Finite Sample Properties Of Pooled Time Series Tests With An Application To The Ppp Hypothesis," Econometric Theory, Cambridge University Press, vol. 20(3), pages 597-625, June.
    5. Aloui, Riadh & Aïssa, Mohamed Safouane Ben & Nguyen, Duc Khuong, 2011. "Global financial crisis, extreme interdependences, and contagion effects: The role of economic structure?," Journal of Banking & Finance, Elsevier, vol. 35(1), pages 130-141, January.
    6. Frank Westermann, 2004. "Does the Euro affect the dynamic interactions of stock markets in Europe? Evidence from France, Germany and Italy," The European Journal of Finance, Taylor & Francis Journals, vol. 10(2), pages 139-148.
    7. DeFusco, Richard A & Geppert, John M & Tsetsekos, George P, 1996. "Long-Run Diversification Potential in Emerging Stock Markets," The Financial Review, Eastern Finance Association, vol. 31(2), pages 343-363, May.
    8. Chung, Pin J. & Liu, Donald J., 1994. "Common stochastic trends in pacific rim stock markets," The Quarterly Review of Economics and Finance, Elsevier, vol. 34(3), pages 241-259.
    9. Meric, Ilhan & Meric, Gulser, 1989. "Potential gains from international portfolio diversification and inter-temporal stability and seasonality in international stock market relationships," Journal of Banking & Finance, Elsevier, vol. 13(4-5), pages 627-640, September.
    10. Inci, A. Can & Li, H.C. & McCarthy, Joseph, 2011. "Financial contagion: A local correlation analysis," Research in International Business and Finance, Elsevier, vol. 25(1), pages 11-25, January.
    11. Bekaert, Geert & Harvey, Campbell R, 1995. "Time-Varying World Market Integration," Journal of Finance, American Finance Association, vol. 50(2), pages 403-444, June.
    12. Dutta, Anupam, 2018. "Implied volatility linkages between the U.S. and emerging equity markets: A note," Global Finance Journal, Elsevier, vol. 35(C), pages 138-146.
    13. Harry Markowitz, 1952. "The Utility of Wealth," Journal of Political Economy, University of Chicago Press, vol. 60(2), pages 151-151.
    14. Gupta, R. & Donleavy, G.D., 2009. "Benefits of diversifying investments into emerging markets with time-varying correlations: An Australian perspective," Journal of Multinational Financial Management, Elsevier, vol. 19(2), pages 160-177, April.
    15. Hilliard, Jimmy E, 1979. "The Relationship between Equity Indices on World Exchanges," Journal of Finance, American Finance Association, vol. 34(1), pages 103-114, March.
    16. Sheng, Hsiao-Ching & Tu, Anthony H., 2000. "A study of cointegration and variance decomposition among national equity indices before and during the period of the Asian financial crisis," Journal of Multinational Financial Management, Elsevier, vol. 10(3-4), pages 345-365, December.
    17. A. G. Malliaris & Jorge L. Urrutia, 2005. "The International Crash of October 1987: Causality Tests," World Scientific Book Chapters, in: Economic Uncertainty, Instabilities And Asset Bubbles Selected Essays, chapter 16, pages 251-262, World Scientific Publishing Co. Pte. Ltd..
    18. Bekaert, Geert & Harvey, Campbell R., 1997. "Emerging equity market volatility," Journal of Financial Economics, Elsevier, vol. 43(1), pages 29-77, January.
    19. Kao, Chihwa, 1999. "Spurious regression and residual-based tests for cointegration in panel data," Journal of Econometrics, Elsevier, vol. 90(1), pages 1-44, May.
    20. Im, Kyung So & Pesaran, M. Hashem & Shin, Yongcheol, 2003. "Testing for unit roots in heterogeneous panels," Journal of Econometrics, Elsevier, vol. 115(1), pages 53-74, July.
    21. Stephen R. Foerster & G. Andrew Karolyi, 1999. "The Effects of Market Segmentation and Investor Recognition on Asset Prices: Evidence from Foreign Stocks Listing in the United States," Journal of Finance, American Finance Association, vol. 54(3), pages 981-1013, June.
    22. Masih, Abul M. M. & Masih, Rumi, 1999. "Are Asian stock market fluctuations due mainly to intra-regional contagion effects? Evidence based on Asian emerging stock markets," Pacific-Basin Finance Journal, Elsevier, vol. 7(3-4), pages 251-282, August.
    23. Taylor, Mark P & Tonks, Ian, 1989. "The Internationalisation of Stock Markets and the Abolition of U.K. Exchange Control," The Review of Economics and Statistics, MIT Press, vol. 71(2), pages 332-336, May.
    24. Sensoy, A. & Yuksel, S. & Erturk, M., 2013. "Analysis of cross-correlations between financial markets after the 2008 crisis," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 392(20), pages 5027-5045.
    25. Peter Pedroni, 1999. "Critical Values for Cointegration Tests in Heterogeneous Panels with Multiple Regressors," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 61(S1), pages 653-670, November.
    26. Geert Bekaert & Campbell R. Harvey & Angela Ng, 2005. "Market Integration and Contagion," The Journal of Business, University of Chicago Press, vol. 78(1), pages 39-70, January.
    27. Agmon, Tamir, 1973. "Country Risk: The Significance of the Country Factor for Share-Price Movements in the United Kingdom, Germany, and Japan," The Journal of Business, University of Chicago Press, vol. 46(1), pages 24-32, January.
    28. repec:bla:obuest:v:61:y:1999:i:0:p:631-52 is not listed on IDEAS
    29. Cha, Baekin & Oh, Sekyung, 2000. "The relationship between developed equity markets and the Pacific Basin's emerging equity markets," International Review of Economics & Finance, Elsevier, vol. 9(4), pages 299-322, October.
    30. Francis, Bill B. & Leachman, Lori L., 1998. "Superexogeneity and the dynamic linkages among international equity markets," Journal of International Money and Finance, Elsevier, vol. 17(3), pages 475-492, June.
    31. Friedman, Joseph & Shachmurove, Yochanan, 1997. "Co-movements of major European community stock markets: A vector autoregression analysis," Global Finance Journal, Elsevier, vol. 8(2), pages 257-277.
    32. Engle, Robert & Granger, Clive, 2015. "Co-integration and error correction: Representation, estimation, and testing," Applied Econometrics, Russian Presidential Academy of National Economy and Public Administration (RANEPA), vol. 39(3), pages 106-135.
    33. Syriopoulos, Theodore & Roumpis, Efthimios, 2009. "Dynamic correlations and volatility effects in the Balkan equity markets," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 19(4), pages 565-587, October.
    34. Lahrech, Abdelmounaim & Sylwester, Kevin, 2011. "U.S. and Latin American stock market linkages," Journal of International Money and Finance, Elsevier, vol. 30(7), pages 1341-1357.
    35. Eun, Cheol S. & Shim, Sangdal, 1989. "International Transmission of Stock Market Movements," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 24(2), pages 241-256, June.
    36. Christos Floros, 2005. "Price Linkages Between the US, Japan and UK Stock Markets," Financial Markets and Portfolio Management, Springer;Swiss Society for Financial Market Research, vol. 19(2), pages 169-178, August.
    37. Carrieri, Francesca & Errunza, Vihang & Hogan, Ked, 2007. "Characterizing World Market Integration through Time," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 42(4), pages 915-940, December.
    38. G. S. Maddala & Shaowen Wu, 1999. "A Comparative Study of Unit Root Tests with Panel Data and a New Simple Test," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 61(S1), pages 631-652, November.
    39. repec:bla:obuest:v:61:y:1999:i:0:p:653-70 is not listed on IDEAS
    40. Graham, Michael & Kiviaho, Jarno & Nikkinen, Jussi, 2012. "Integration of 22 emerging stock markets: A three-dimensional analysis," Global Finance Journal, Elsevier, vol. 23(1), pages 34-47.
    41. Levin, Andrew & Lin, Chien-Fu & James Chu, Chia-Shang, 2002. "Unit root tests in panel data: asymptotic and finite-sample properties," Journal of Econometrics, Elsevier, vol. 108(1), pages 1-24, May.
    42. Ghosh, Asim & Saidi, Reza & Johnson, Keith H, 1999. "Who Moves the Asia-Pacific Stock Markets--US or Japan? Empirical Evidence Based on the Theory of Cointegration," The Financial Review, Eastern Finance Association, vol. 34(1), pages 159-170, February.
    43. Jian Yang & James Kolari & Insik Min, 2003. "Stock market integration and financial crises: the case of Asia," Applied Financial Economics, Taylor & Francis Journals, vol. 13(7), pages 477-486.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Sangita Choudhary & Shelly Singhal, 0. "International linkages of Indian equity market: evidence from panel co-integration approach," Journal of Asset Management, Palgrave Macmillan, vol. 0, pages 1-9.
    2. Huyghebaert, Nancy & Wang, Lihong, 2010. "The co-movement of stock markets in East Asia: Did the 1997-1998 Asian financial crisis really strengthen stock market integration?," China Economic Review, Elsevier, vol. 21(1), pages 98-112, March.
    3. Abdul Karim, Zulkefly & Abdul Karim, Bakri, 2008. "Stock market integration: Malaysia and its major trading partners," MPRA Paper 26976, University Library of Munich, Germany, revised Jun 2009.
    4. Lee, Hyunchul & Cho, Seung Mo, 2017. "What drives dynamic comovements of stock markets in the Pacific Basin region?: A quantile regression approach," International Review of Economics & Finance, Elsevier, vol. 51(C), pages 314-327.
    5. Wang, Lihong, 2014. "Who moves East Asian stock markets? The role of the 2007–2009 global financial crisis," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 28(C), pages 182-203.
    6. Chen, Peng, 2018. "Understanding international stock market comovements: A comparison of developed and emerging markets," International Review of Economics & Finance, Elsevier, vol. 56(C), pages 451-464.
    7. Diamandis, Panayiotis F., 2009. "International stock market linkages: Evidence from Latin America," Global Finance Journal, Elsevier, vol. 20(1), pages 13-30.
    8. Carlos Alberto Barreto Nieto & Jacobo Campo Robledo, 2012. "Relación a largo plazo entre consumo de energía y PIB en América Latina: Una evaluación empírica con datos panel," Revista Ecos de Economía, Universidad EAFIT, October.
    9. Ramesh Chandra Das & Tonmoy Chatterjee & Enrico Ivaldi, 2022. "Nexus between Housing Price and Magnitude of Pollution: Evidence from the Panel of Some High- and-Low Polluting Cities of the World," Sustainability, MDPI, vol. 14(15), pages 1-18, July.
    10. Thian-Hee Yiew & Chin-Yu Lee & Lin-Sea Lau, 2021. "Economic growth in selected G20 countries: How do different pollution emissions matter?," Environment, Development and Sustainability: A Multidisciplinary Approach to the Theory and Practice of Sustainable Development, Springer, vol. 23(8), pages 11451-11474, August.
    11. Pao, Hsiao-Tien & Tsai, Chung-Ming, 2011. "Multivariate Granger causality between CO2 emissions, energy consumption, FDI (foreign direct investment) and GDP (gross domestic product): Evidence from a panel of BRIC (Brazil, Russian Federation, I," Energy, Elsevier, vol. 36(1), pages 685-693.
    12. Omri, Anis, 2018. "Entrepreneurship, sectoral outputs and environmental improvement: International evidence," Technological Forecasting and Social Change, Elsevier, vol. 128(C), pages 46-55.
    13. Moheddine Younsi & Marwa Bechtini & Mongi Lassoued, 2024. "The relationship between insurance development, population, economic growth, and health expenditures in OECD countries: a panel causality analysis," Future Business Journal, Springer, vol. 10(1), pages 1-19, December.
    14. Edmore Mahembe & Nicholas Mbaya Odhiambo, 2019. "Foreign aid, poverty and economic growth in developing countries: A dynamic panel data causality analysis," Cogent Economics & Finance, Taylor & Francis Journals, vol. 7(1), pages 1626321-162, January.
    15. Gharehgozli, Orkideh, 2021. "An empirical comparison between a regression framework and the Synthetic Control Method," The Quarterly Review of Economics and Finance, Elsevier, vol. 81(C), pages 70-81.
    16. El-Shazly, Alaa, 2013. "Electricity demand analysis and forecasting: A panel cointegration approach," Energy Economics, Elsevier, vol. 40(C), pages 251-258.
    17. Pao, Hsiao-Tien & Tsai, Chung-Ming, 2010. "CO2 emissions, energy consumption and economic growth in BRIC countries," Energy Policy, Elsevier, vol. 38(12), pages 7850-7860, December.
    18. Breitung, Jörg & Pesaran, Mohammad Hashem, 2005. "Unit roots and cointegration in panels," Discussion Paper Series 1: Economic Studies 2005,42, Deutsche Bundesbank.
    19. Juan Carlos Aquino & N. R. Ramírez-Rondán, 2020. "Estimating factor shares from nonstationary panel data," Empirical Economics, Springer, vol. 58(5), pages 2353-2380, May.
    20. Liu, Xuyi & Zhang, Shun & Bae, Junghan, 2017. "The nexus of renewable energy-agriculture-environment in BRICS," Applied Energy, Elsevier, vol. 204(C), pages 489-496.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:pal:assmgt:v:21:y:2020:i:4:d:10.1057_s41260-020-00165-2. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Sonal Shukla or Springer Nature Abstracting and Indexing (email available below). General contact details of provider: http://www.palgrave-journals.com/ .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.