Abstract
We examine the impact of the COVID-19 pandemic on the interlinkages between the Indian stock market and some of the largest indices across the world. We compare the co-movements of these stock markets to identify the possibilities for international portfolio diversification. We use the Johansen cointegration technique and Vector Error Correction Mechanism to understand the nature of long-run and short-run cointegration. We also apply the Impulse Response Function to understand the time effects of the shock. The results of the Johansen cointegration test indicate that there is an increased level of cointegration among the stock market indices post the pandemic. Our results of VEC Block Exogeneity Wald Tests indicate that in the preCovid time, there were linkages between the stock markets of India and the U.K., Japan, and Hongkong. However, the post-pandemic results indicate the shock transmission effects from India to two very important European indices, i.e., the U.K. and Euronext stock exchanges, and to the stock market of Japan. We also observe transmission effects from the USA to India post-Covid period.
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