Do These Stock Markets Move Together? an Empirical Study of India and Its Major Trading Partners

作者：Alan Harper, Zhenhu Jin, Gregory D. Gleghorn · 发表于：Academy of Accounting and Financial Studies journal · 年份：2013 · 被引用次数：3 · 研究领域：Market Dynamics and Volatility、Financial Risk and Volatility Modeling、Monetary Policy and Economic Impact

ABSTRACTThis paper investigates the relationships between the monthly returns of the Indian stock returns, and of some of India 's major trading partners. By using a multivariate co-integration model, we find that the monthly returns of these markets tend to converge in the long run even though they may move in different directions in the short term. The results of our study may provide some insights to investors of Indian stock market who seek to reduce their risk exposure by diversifying in these markets.Keywords: Indian stock market, Co-integration, Diversification, Error CorrectionINTRODUCTIONInvestors constantly seek opportunities to maximize the expected rate of return while minimizing the risk. The benefit of international is based on the belief the stock markets in different countries are not highly correlated, due to domestic, economic, financial, regulatory, or other factors. In other words, what is considered nondiversifiable risk in one country may be considered diversifiable risk when one holds an international portfolio? That is the basis for international diversification. However, with more and more international trade and cross border investments, the economies of some countries become more integrated with some of their major trading partners. The economies of the countries involved become more interdependent and less insulated from each other. That raises a question: will the more integrated economies make it more difficult for investors to reduce risk by inv...