Journal Press India®

An Empirical Study of Testing Financial Integration Between Indian and New York Stock Market

Vol 19 , Issue 1 , January - June 2018 | Pages: 107-116 | Research Paper  

https://doi.org/10.51768/dbr.v19i1.191201816


Author Details ( * ) denotes Corresponding author

1. * Amit Kumar Singh, Associate Professor, Department of Commerce, Delhi School of Economics, University of Delhi, Delhi, India (amitipo10@gmail.com)
2. Rohit Kumar Shrivastav, Ph.D. Research Scholar, Department of Commerce, Delhi School of Economics, University of Delhi, Delhi, India

Purpose: The current study is an attempt to analyze the financial integration between NSE and NYSE stock market on the basis of daily closing index of NYSE and NSE. A saying goes like, ‘when America sneezes, world catches cold’. Therefore, we tried to testify that to what extent this statement is applicable in respect of Indian stock exchange market and further study inter linkages and inter relationships between them.

Design/Methodology/Approach: For the purpose of this study, New York Stock Exchange (NYSE) has been considered as America’s representative exchange and in respect to India, the National Stock Exchange (NSE) has been selected. The monthly closing stock index price has been taken starting from January, 2000 to December, 2016. The data were mainly collected from NYSE and NSE website. The Descriptive Statistic has been applied to study the normal trend and pattern. For checking data series stationarity, the line graph and the log value of indices have been used and further, to testify the data Augmented Dickey-Fuller (ADF) test under unit root hypothesis has been applied. Also, Granger Causality was applied for causation and for long-term relationship, Johansen Co-integration test was used. E-Views 9 was used for the analysis.

Findings: Descriptive statistics show that stock market of India provides lower returns in comparison to the New York stock market. Results inferred by Granger Causality test show that returns at NYSE does granger cause the returns at Indian stock exchange which also depicts that the returns on NSE is influenced more with NYSE index co-movements but not vice-versa because NSE does not Granger Cause return at NYSE. The result of the Johansen Co-integration test suggest the existence of cointegration between them which means that movements in NYSE index influences NSE market and both having co-movements.

Research Limitations/Implications: We took the sample data for the period January, 2000 to December, 2016. A larger sample data could also be taken in the future and although only one stock market index from both the countries were taken but one more major stock exchange could also be taken for the same study like Bombay Stock Exchange (BSE) and National Stock Exchange (NSE) and New York Stock Exchange (NYSE), National Association of Securities Dealers Automated Quotations (NASDAQ).

Practical Implications: The study provides the basis for framing government policy keeping in mind the existence of empirically proven financial integration between NSE and NYSE. Not only this, various market participants may use the conclusion of this study in order to formulate different investment strategy especially keeping in mind the fluctuations happening in Indian and American market.

Originality/Value: The study is unique, unpublished, and original.

Keywords

India-New York Inter-relationship, Stock Market, Integration, Granger Causality.

  1. Aktar, I. (2009). Is there any co-movement between stock markets of Turkey, Russia and Hungary? International Research Journal of Finance and Economics, 26(1), 193-200.
  2. Bekaert, G., & Harvey, C. R. (1995). Time-varying world market integration. The Journal of Finance, 50(2), 403-444. 
  3. Bhanumurthy, K. V., & Singh, A. K. (2014). Short run performance of IPO market in India. International Journal of Financial management, 2(4), 11-22. 
  4. Campbell, J. Y., & Hamao, Y. (1992). Predictable stock returns in the United States and Japan: A study of long-term capital market integration. Journal of Finance, 47(1), 43-69. 
  5. Chaudhuri, K. (1997). Cointegration, error correction and granger causality: An Application with Latin American Stock Markets. Applied Economis Letters, 4(8), 469-471. 
  6. Chittedi, K. R. (2009). Global stock market development and integration: With special reference to BRIC countries. International Review of Applied Financial Issues and Economics, 2(1), 3-21.
  7. Faff, R. W., & Mittoo, U. R. (2003). Capital market integration and industrial structure: The case of Australia, Canada and the United States. Journal of Economic Integration, 18(3), 433-465.
  8. Goel, K., & Gupta, R. (2011). Impact of globalization on stock market development in India. Delhi Business Review, 12(1), 69-84.
  9. Gulia, R., & Handa, H. (2015). An econometric evaluation of the stock market inter-linkages of BRICS countries. International Journal of Commerce, Business and Management (IJCBM), 4(3), 1195-1205. 
  10. Gupta, R., & Basu, P. K. (2008). Portfolio optimisation in the Indian stock market- Industry sector analysis. Delhi Business Review, 9(1), 21-30.
  11. Harvey, C. R. (2001). The specification of conditional expectations. Journal of Empirical Finance, 8(5), 573-637. 
  12. Karolyi, G. A. (1992). Predicting Risk: Some new generalizations. Management Science, 38(1), 57-74.
  13. Khan, A. Q., & Asif, N. (2000). Integrated strategy for global financial flows and social safety net in INDIA. Delhi Business Review, 1(2), 95-101. 
  14. Longin, F., & Solnik, B. (1995). Is the correlation in international equity returns constant: 1960-1990? Journal of International Money and Finance 14(1), 3-26.
  15. Maheshwari, S., Krishnamoorthy, A., Berry, W., & Stone, J. (2003). Lack of timeliness in reported earnings and fundamental financial statement analysis. Delhi Business Review, 4(2), 21-31.
  16. Modi, P. K. (2000). Management of global financial flows: A critical study. Delhi Business Review, 1(2), 89-94.
  17. Mukherjee, D. (2007). Comparative Analysis of Indian stock market with international markets. Great Lakes Herald, 1(1), 39-71. 
  18. Mukhopadhyay, D., & Sarkar, N. (2003). Stock return and macroeconomic fundamentals in model- specification framework: Evidence from Indian stock market. Indian Statistical Institute, Economic Research Unit, ERU 2003-05 Discussion Paper, January 2003, 1-28.
  19. Nashier, T. (2015). Financial integration between BRICS and developed stock markets. International Journal of Business and Management Invention, 4(1), 65-71.
  20. Oseni, I. O., & Nwosa, P. I. (2011). Stock Market Volatility and Macroeconomic Variables Volatility in Nigeria: An Exponential GARCH Approach. European Journal of Business and Management, 3(12), 43-53.
  21. Ripley, D. M. (1973). Systematic elements in the linkage of national stock market indices. Review of Economics and Statistics, 55(2), 356-361. 
  22. Sheu, H. J., & Liao C. H. (2011). Dynamics of stock market integration between the US and the BRIC. African Journal of Business Management, 5(9), 3674-3689.
  23. Singh, A. K., & Gupta, N. (2013). Stock investment decisions: An empirical study of the impact of human asset valuation information. Paper presented in IV World Finance Conference at Amathus Beach Hotel, Limassol, Cyprus. Retrieved from http://world-financeconference.com/papers_wfc2/339.pdf, accessed on January 10, 2018.
  24. Singh, A. K., & Shrivastav, R. K. (2016). Study of Inter-linkages and Inter-dependence between Stock market of India and Sri Lanka. Business Analyst, 37(2), 197-207. 
  25. Tripathi, V. &, Kumar, A. (2014). Relationship between inflation and stock returns - Evidence from BRICS markets using panel co-integration test. International Journal of Accounting and Financial Reporting, 4(2), 647-658.
  26. Venkatesh, N. (2013). Rise of BRICS economy and its impact on global stock markets. IRACST – International Journal of Commerce, Business and Management, 2(1), 67-77. 
  27. Vieito, J. P., Bhanumurthy, K.V., & Tripathi, V. (2013). Market Efficiency in G-20 Countries: The Paradox of Financial Crisis. Annals of Financial Economics, 8(1), 1-27.
Abstract Views: 0
PDF Views: 354

Advanced Search

News/Events

Institute of Managem...

Deccan Education Society Institute of Management Development and Re...

S.B. Patil Institute...

Pimpri Chinchwad Education Trust's S.B. Patil Institute of Mana...

D. Y. Patil IMCAM, A...

D. Y. Patil Institute of Master of Computer Applications & Managem...

Vignana Jyothi Insti...

Vignana Jyothi Institute of Management International Conference on ...

Department of Commer...

Department of Commerce, Faculty of Commerce & Business, University...

Birla Institute of M...

Birla Institute of Management Technology (BIMTECH) 3rd Pritam Singh M...

OP Jindal University...

OP Jindal University, India 4th International Conference on  ...

Department of MBA, N...

Department of MBA, Narayana Engineering College Nellore International...

Vignana Jyothi Insti...

Vignana Jyothi Institute of Management Conference Proceedings,...

Online Proceedings R...

Conference Proceedings, March 2023 ISBN: 978-81-956810-6-8 ...

By continuing to use this website, you consent to the use of cookies in accordance with our Cookie Policy.