IDEAS home Printed from https://ideas.repec.org/a/sae/soueco/v6y2005i2p165-191.html
   My bibliography  Save this article

Behaviour of Stock Markets in South Asia

Author

Listed:
  • W.I.C.S. Gunasinghe

    (Department of Economics, University of Ruhuna, Matara, Sri Lanka, E-mail: gunasinghe@econ.ruh.ac.lk, Tel: (+94)0412227014, Fax: (+94)0412227014 The author gratefully acknowledges the comments and suggestions made by Dr Saman Kelegama, anonymous referees and Dr Amala de Silva. The author would also like to thank Professor D. Atapattu, Dr J.S. Bandara, Dr A. Gunasekarage, Mr K.H. Nandasiri and participants at the Sri Lankan Statistical Conference held in 2004 at the PGIS in the University of Peradeniya for their helpful suggestions.)

Abstract

This paper examines the integration behaviour and volatility spillover transmissions across the stock markets of Sri Lanka, India and Pakistan, after liberalization policies initiated in the early 1990s. The paper examines ways in which these two issues could relate to movements of stock prices and then investigates the impact of this on the corresponding stock markets using correlation analysis, a multivariate co-integration test and generalized impulse response (GIR) functions based on a one factor model. The estimated correlation results show a marginal growth of integration for India-Sri Lanka and India-Pakistan combinations for the period 1997–2002 compared to 1992–96. The multivariate co-integration test does not provide evidence on any long-run relation across these markets. However, as co-integration test does not consider a gradual integration process among these markets, the rejection of the presence of a long-run relationship does not imply that these markets are totally independent of one another. Results of the GIRs test used to answer the second issue raised in the paper confirm that a sudden change of the Indian stock market may have some marginal spillover effects on Sri Lanka and Pakistan stock price movements.

Suggested Citation

  • W.I.C.S. Gunasinghe, 2005. "Behaviour of Stock Markets in South Asia," South Asia Economic Journal, Institute of Policy Studies of Sri Lanka, vol. 6(2), pages 165-191, September.
  • Handle: RePEc:sae:soueco:v:6:y:2005:i:2:p:165-191
    DOI: 10.1177/139156140500600201
    as

    Download full text from publisher

    File URL: https://journals.sagepub.com/doi/10.1177/139156140500600201
    Download Restriction: no

    File URL: https://libkey.io/10.1177/139156140500600201?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
    ---><---

    References listed on IDEAS

    as
    1. MacKinnon, James G & Haug, Alfred A & Michelis, Leo, 1999. "Numerical Distribution Functions of Likelihood Ratio Tests for Cointegration," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 14(5), pages 563-577, Sept.-Oct.
    2. Dickey, David A & Fuller, Wayne A, 1981. "Likelihood Ratio Statistics for Autoregressive Time Series with a Unit Root," Econometrica, Econometric Society, vol. 49(4), pages 1057-1072, June.
    3. Phylaktis, Kate & Ravazzolo, Fabiola, 2002. "Measuring financial and economic integration with equity prices in emerging markets," Journal of International Money and Finance, Elsevier, vol. 21(6), pages 879-903, November.
    4. Johansen, Soren & Juselius, Katarina, 1990. "Maximum Likelihood Estimation and Inference on Cointegration--With Applications to the Demand for Money," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 52(2), pages 169-210, May.
    5. Kam C. Chan & Benton E. Gup & Ming-Shiun Pan, 1997. "International Stock Market Efficiency and Integration: A Study of Eighteen Nations," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 24(6), pages 803-813.
    6. Kent Hargis, 2002. "Forms of Foreign Investment Liberalization and Risk in Emerging Stock Markets," Journal of Financial Research, Southern Finance Association;Southwestern Finance Association, vol. 25(1), pages 19-38, March.
    7. Kam C. Chan & Benton E. Gup & Ming‐Shiun Pan, 1997. "International Stock Market Efficiency and Integration: A Study of Eighteen Nations," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 24(6), pages 803-813, July.
    8. Perron, Pierre, 1989. "The Great Crash, the Oil Price Shock, and the Unit Root Hypothesis," Econometrica, Econometric Society, vol. 57(6), pages 1361-1401, November.
    9. Ali F. Darrat & Omar M. Benkato, 2003. "Interdependence and Volatility Spillovers Under Market Liberalization: The Case of Istanbul Stock Exchange," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 30(7‐8), pages 1089-1114, September.
    10. Arusha Cooray, 2004. "Do the Stock Markets of South Asia Follow a Random Walk?," Econometric Society 2004 Australasian Meetings 169, Econometric Society.
    11. Harris Dellas & Martin K. Hess, 2002. "Financial Development and the Sensitivity of Stock Markets to External Influences," Review of International Economics, Wiley Blackwell, vol. 10(3), pages 525-538, August.
    12. repec:bla:reviec:v:10:y:2002:i:3:p:525-38 is not listed on IDEAS
    13. Fifield, S G M & Power, D M & Sinclair, C D, 2002. "Macroeconomic Factors and Share Returns: An Analysis Using Emerging Market Data," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 7(1), pages 51-62, January.
    14. Pesaran, H. Hashem & Shin, Yongcheol, 1998. "Generalized impulse response analysis in linear multivariate models," Economics Letters, Elsevier, vol. 58(1), pages 17-29, January.
    15. Antonios Antoniou & Gioia Pescetto & Antonis Violaris, 2003. "Modelling International Price Relationships and Interdependencies Between the Stock Index and Stock Index Futures Markets of Three EU Countries: A Multivariate Analysis," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 30(5-6), pages 645-667.
    16. Antonios Antoniou & Gioia Pescetto & Antonis Violaris, 2003. "Modelling International Price Relationships and Interdependencies Between the Stock Index and Stock Index Futures Markets of Three EU Countries: A Multivariate Analysis," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 30(5‐6), pages 645-667, June.
    17. Ali F. Darrat & Omar M. Benkato, 2003. "Interdependence and Volatility Spillovers Under Market Liberalization: The Case of Istanbul Stock Exchange," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 30, pages 1089-1114.
    18. Ripley, Duncan M, 1973. "Systematic Elements in the Linkage of National Stock Market Indices," The Review of Economics and Statistics, MIT Press, vol. 55(3), pages 356-361, August.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. David Wästerfors & Veronika Burcar, 2014. "Safety Work with an Ethnic Slant," Social Inclusion, Cogitatio Press, vol. 2(3), pages 088-101.
    2. Dr. Ranjan Dasgupta, 2014. "The Integration of Indian and SAARC Stock Markets – An Empirical Study," Indian Journal of Commerce and Management Studies, Educational Research Multimedia & Publications,India, vol. 5(1), pages 09-17, January.
    3. Muhammad Niaz Khan & Suzanne G. M. Fifield & Nongnuch Tantisantiwong & David M. Power, 2022. "Changes in co-movement and risk transmission between South Asian stock markets amidst the development of regional co-operation," Financial Markets and Portfolio Management, Springer;Swiss Society for Financial Market Research, vol. 36(1), pages 87-117, March.
    4. Alok Pandey & Surya Bhushan Kumar, 2011. "Volatility Transmission from Global Stock Exchanges to India," Vision, , vol. 15(4), pages 347-360, December.

    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. Jian Yang & Insik Min & Qi Li, 2003. "European Stock Market Integration: Does EMU Matter?," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 30(9‐10), pages 1253-1276, December.
    2. 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.
    3. Çatik, A. Nazif & Önder, Özlem, 2013. "An asymmetric analysis of the relationship between oil prices and output: The case of Turkey," Economic Modelling, Elsevier, vol. 33(C), pages 884-892.
    4. Eleftherios J. Thalassinos & Evagelos D. Politis, 2011. "International Stock Markets: A Co-integration Analysis," European Research Studies Journal, European Research Studies Journal, vol. 0(4), pages 113-130.
    5. Erie Febrian & Aldrin Herwany, 2009. "Volatility Forecasting Models and Market Co-Integration: A Study on South-East Asian Markets," Working Papers in Economics and Development Studies (WoPEDS) 200911, Department of Economics, Padjadjaran University, revised Sep 2009.
    6. Derek Bond & Michael J. Harrison & Edward J. O'Brien, 2005. "Testing for Long Memory and Nonlinear Time Series: A Demand for Money Study," Trinity Economics Papers tep20021, Trinity College Dublin, Department of Economics.
    7. Erdal Demirhan & Banu Demirhan, 2015. "The Dynamic Effect of ExchangeRate Volatility on Turkish Exports: Parsimonious Error-Correction Model Approach," Panoeconomicus, Savez ekonomista Vojvodine, Novi Sad, Serbia, vol. 62(4), pages 429-451, September.
    8. Yau, Hwey-Yun & Nieh, Chien-Chung, 2006. "Interrelationships among stock prices of Taiwan and Japan and NTD/Yen exchange rate," Journal of Asian Economics, Elsevier, vol. 17(3), pages 535-552, June.
    9. Hamdi, Helmi & Sbia, Rashid, 2013. "Dynamic relationships between oil revenues, government spending and economic growth in an oil-dependent economy," Economic Modelling, Elsevier, vol. 35(C), pages 118-125.
    10. Mohamed Amine Boutaba, 2009. "Dynamic linkages among European carbon markets," Economics Bulletin, AccessEcon, vol. 29(2), pages 499-511.
    11. Claudeci Da Silva & Hugo Agudelo Murillo & Joaquim Miguel Couto, 2014. "Early Warning Systems: Análise De Ummodelo Probit De Contágio De Crise Dos Estados Unidos Para O Brasil(2000-2010)," Anais do XL Encontro Nacional de Economia [Proceedings of the 40th Brazilian Economics Meeting] 110, ANPEC - Associação Nacional dos Centros de Pós-Graduação em Economia [Brazilian Association of Graduate Programs in Economics].
    12. Hasanov, Fakhri J. & Shannak, Sa'd, 2020. "Electricity incentives for agriculture in Saudi Arabia. Is that relevant to remove them?," Energy Policy, Elsevier, vol. 144(C).
    13. Herwany, Aldrin & Febrian, Erie, 2008. "Co-integration and Causality Analysis on Developed Asian Markets For Risk Management & Portfolio Selection," MPRA Paper 10259, University Library of Munich, Germany.
    14. Ewing, Bradley T. & Payne, James E. & Sowell, Clifford, 1999. "NAFTA and North American stock market linkages: an empirical note," The North American Journal of Economics and Finance, Elsevier, vol. 10(2), pages 443-451.
    15. Orawan Ratanapakorn & Subhash C Sharma, 2002. "Interrelationships among regional stock indices," Review of Financial Economics, John Wiley & Sons, vol. 11(2), pages 91-108.
    16. Chancharat,Surachai & Valadkhani, Abbas, 2007. "An Empirical Analysis of the Thai and Major International Stock Markets," Economics Working Papers wp07-13, School of Economics, University of Wollongong, NSW, Australia.
    17. Nieh, Chien-Chung & Yau, Hwey-Yun, 2004. "Time series analysis for the interest rates relationships among China, Hong Kong, and Taiwan money markets," Journal of Asian Economics, Elsevier, vol. 15(1), pages 171-188, February.
    18. Febrian, Erie & Herwany, Aldrin, 2007. "Co-integration and Causality Among Jakarta Stock Exchange, Singapore Stock Exchange, and Kuala Lumpur Stock Exchange," MPRA Paper 9632, University Library of Munich, Germany.
    19. Lorde, Troy & Jackman, Mahalia & Thomas, Chrystol, 2009. "The macroeconomic effects of oil price fluctuations on a small open oil-producing country: The case of Trinidad and Tobago," Energy Policy, Elsevier, vol. 37(7), pages 2708-2716, July.
    20. Matei, Florin, 2014. "An empirical examination of stock market integration in EMU," MPRA Paper 60717, University Library of Munich, Germany.

    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:sae:soueco:v:6:y:2005:i:2:p:165-191. 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: SAGE Publications (email available below). General contact details of provider: http://www.ips.lk/ .

    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.