An Empirical Study of Co-movement in Selected Stock Exchanges. (March 2016)

• Record Type: Journal Article
• Authors: Patel, Ritesh
• Is Part Of: Asia-Pacific journal of management research and innovation. Volume 12:Number 1(2016:Mar.)
• Page Start: 23
• Page End: 30
• Publication Date: 2016-03
• Subjects: Co-movement -- developed stock market -- co-integration -- Granger causality -- emerging markets; Industrial management -- India -- Periodicals; Industrial management -- Periodicals; Commerce -- Periodicals; Business enterprises -- India -- Periodicals; India -- Commerce -- Periodicals; 330.0954
• DOI: 10.1177/2319510X16647293
• Languages: English
• ISSNs: 2319-510X

Abstract

This study explores the co-movement amongst the selected stock exchanges, that is, 'BSE', 'Hangseng', 'MXX', 'RTS', 'BVSP', 'FTSE-100', 'Nikkei' and 'NASDAQ'. This study is done using the daily index of all stock markets from 1 January 1998 to 30 June 2015. This study has been done using various tests like 'The ADF test', 'The PP test', 'The Granger causality test' and 'The Johansen co-integration test'. ADF & PP test show that the series are non-stationary. The result of the Granger causality test indicates that the BSE is Granger-caused by BVSP, FTSE 100, MXX, NASDAQ and the RTS market. The Mexican (MXX) and Russian (RTS) stock exchanges have an impact on Brazilian (BVSP) stock exchange. The Return of the FTSE 100 is affected by BVSP, MXX and NASDAQ, whereas Hangseng is affected by BSE, BVSP, FTSE 100, MXX and NASDAQ. None of the stock exchanges in the study have an impact on the MXX and Nikkei. NASDAQ is affected by BVSP, FTSE 100 and Hangseng markets. The stock exchange RTS (Russia) has the dependency on the FTSE-100 (UK) and Hangseng Stock Exchange. RTS depend on FTSE 100 and Hangseng. The co-integration test is carried out which indicates the long-term relationship amongst all the selected markets. Principal component analysis makes the fragmentation of market in the two regions, the South Asian and the Latin American stock market (BSE, BVSP, NASDAQ, MXX, Hangseng and FTSE 100) and the Northeast Asian stock market (RTS & Nikkei).