Stock Market Integration- Empirical Evidence from Leading Stock Indices

Abstract

The relevance of this paper is stemming out of the time in which it has been conceptualized and written, i.e. the year 2020 when the entire world is undergoing a severe crisis, be it social or financial. The paper aims at establishing a relationship between the various stock indices under study and understands how the movement in Indian stock market is explained by the other markets. The market economies of the world are inter-dependent on each other due to the globalization of trade amongst them. The paper will take into consideration 4 leading stock indices to understand their pattern of movement and their association in the short and long run. The study of co integration is conducted on past ten years data (April 2011 to May 2020) of Nikkei (Japan), Dow Jones (USA), Hang Seng (Hong Kong) and SENSEX (India). Vector Autoregressive Model (VAR) is used to conduct the analysis. The findings indicate that there exists only a short run relationship amongst them.