Integration of Indian Stock Markets with Other Stock Markets of Developed and Developing Countries in the World

Abstract

The study has empirically assessed the integration of Indian stock markets (National Stock Exchange and Bombay Stock Exchange) with four developing countries (China, Indonesia, Malaysia and Taiwan) and four developed countries (United States of America, United Kingdom, Singapore and Japan). Five years’ daily data (1st January 2009–31st December 2013) of representative indices of these countries have been used for the study. Descriptive statistics of returns of all the indices show that none of the stock markets was able to provide any return in this duration. Co-integration test and Granger Causality test was used to check the long-run and short-run relationships, respectively. Co-integration test proved that except Japan all the stock markets have long-run relationship with Indian stock markets. Hence, international investors can reduce the risk by diversifying their portfolio between India and Japan. Granger causality test proved that short-run movement of Indian stock market also cannot explain the return of Japan and Taiwan stock market.