Co-integration of Indian stock market with the markets of developed European countries
Journal Title: PARIPEX-Indian Journal of Research - Year 2016, Vol 5, Issue 12
Abstract
Liberalization, privatization and globalization (LPG) has removed the barriers of capital flow from one country to another country. This free flow of capital among countries has brought co-movement in financial markets. The paper investigates long term relationship of Indian stock market with the markets of two developed European countries UK, & Germany. For the research and analysis, Daily closing data of UKX, DAX and Nifty for 11 years from 01 January 2004 to 30 December 2014 were collected. After cleaning, 2416 cleaned and synchronized data set were used for the research. Unit root test of the level series data and log difference data was conducted to test stationarity. The test accepts null hypothesis that it has a unit root. DF, ADF & PP test confirms the indices are 1 (l) process. To test co-integration among the markets, Johansen co-integration test was employed. Both Eigen value test and Trace test confirms no co-integration of Indian market with the markets of UK, & Germany. It was further found by causality test that markets do not Granger cause each other. Unrestricted VAR test calculated by taking lag 2 reflects that some of the markets can be auto regressed against the lag value of its own and some with the lag value of others and with the lag value of both.
Authors and Affiliations
Dr. Abhay Kumar
Keywords
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