Title: Analysing interlinkages of Indian stock market with other emerging Asian markets
Authors: Himanshu Goel; Narinder Pal Singh
Addresses: Jagan Institute of Management Studies, Rohini, New Delhi – 110085, India ' Jagan Institute of Management Studies, Rohini, New Delhi – 110085, India
Abstract: This study aims to analyse the international linkage of Bombay Stock Exchange (BSE) Sensex with the fastest emerging markets namely China, Korea, and Taiwan. The results of the Johansen cointegration test reveal that there exist no significant cointegration among the selected markets. Granger causality test reveals unidirectional causality running from India to China and bidirectional causality between India and Korea. However, no significant short run causality was found between India and Taiwan. The results of forecasted error variance decomposition (FEVD) and impulse response function (IRF) reveal that the Indian and Chinese stock markets are majorly impacted by their own shocks whereas the stock markets of Korea and Taiwan are significantly affected by shocks in BSE as well. The results of this study may prove significant for retail investors, portfolio managers, foreign institutional investors and high networth individuals in designing the optimal portfolio.
Keywords: cointegration; causality; Sensex; international linkage; variance decomposition; FEVD; forecasted error variance decomposition; emerging markets; IRF; impulse response function; BSE; Bombay Stock Exchange; India.
International Journal of Economics and Business Research, 2021 Vol.22 No.1, pp.75 - 91
Received: 08 Jun 2020
Accepted: 12 Aug 2020
Published online: 16 Jul 2021 *