How far India has gone down the road towards financial integration with US since subprime crisis? An Econometric Analysis

Saha, Malayendu and Bhunia, Amalendu (2012): How far India has gone down the road towards financial integration with US since subprime crisis? An Econometric Analysis.

Abstract

The present paper aims to study the causal relationship between the US and Indian equity markets using Johansen’s cointegration and variance decomposition analyses. Since the opening up of the economy and subsequent economic and political reforms, India has made tremendous strides in the global equity markets and also been impinged on by the recent happenings. Eviews 7 package program has been used for arranging the data and conducting econometric analyses. The ADF test shows that the time series data used for the study are stationary and integrated of order one. The Johansen’s co-integration test reveals that there exists long run equilibrium relation between the selected variables. The Granger causality test in the vector error correction model suggests the evidence of feedback causality running between the six stock exchanges. However, there is no dependence of any of the individual exchange over the other.

• Item Type: MPRA Paper
• Language: English
• Keywords: Stock Market Integration; India; United States; Johansen’s Cointegration Analysis; Vector Error Correction Model; Variance Decomposition Analysis
• Subjects: C - Mathematical and Quantitative Methods > C3 - Multiple or Simultaneous Equation Models ; Multiple Variables > C32 - Time-Series Models ; Dynamic Quantile Regressions ; Dynamic Treatment Effect Models ; Diffusion Processes ; State Space Models; G - Financial Economics > G1 - General Financial Markets > G15 - International Financial Markets

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