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Interdependence and dynamic linkages between the emerging stock markets of South Asia

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Author Info

  • Paresh Narayan
  • Russell Smyth
  • Mohan Nandha

Abstract

The present article examines the dynamic linkages between the stock markets of Bangladesh, India, Pakistan and Sri Lanka using a temporal Granger causality approach by binding the relationship among the stock price indices within a multivariate cointegration framework. We also examine the impulse response functions. Our main finding is that in the long run, stock prices in Bangladesh, India and Sri Lanka Granger-cause stock prices in Pakistan. In the short run there is unidirectional Granger causality running from stock prices in Pakistan to India, stock prices in Sri Lanka to India and from stock prices in Pakistan to Sri Lanka. Bangladesh is the most exogenous of the four markets, reflecting its small size and modest market capitalization. Copyright (c) 2004 Accounting and Finance Association of Australia and New Zealand.

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Bibliographic Info

Article provided by Accounting and Finance Association of Australia and New Zealand in its journal Accounting and Finance.

Volume (Year): 44 (2004)
Issue (Month): 3 ()
Pages: 419-439

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Handle: RePEc:bla:acctfi:v:44:y:2004:i:3:p:419-439

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Cited by:
  1. Gupta, R. & Donleavy, G.D., 2009. "Benefits of diversifying investments into emerging markets with time-varying correlations: An Australian perspective," Journal of Multinational Financial Management, Elsevier, vol. 19(2), pages 160-177, April.
  2. De Gooijer, Jan G. & Sivarajasingham, Selliah, 2008. "Parametric and nonparametric Granger causality testing: Linkages between international stock markets," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 387(11), pages 2547-2560.
  3. Seshaiah, S.V., 2006. "Indian Capital Market Integration with Select Developed and Developing Countries," Applied Econometrics and International Development, Euro-American Association of Economic Development, vol. 6(2).
  4. Abdul Karim, Bakri & Abdul Majid, M. Shabri & Abdul Karim, Samsul Ariffin, 2009. "Financial Integration between Indonesia and Its Major Trading Partners," MPRA Paper 17277, University Library of Munich, Germany.
  5. HUSSAIN Haroon & HUSSAIN Rana Yasir & SHAH Syed Waqar Azeem & FRAZ Ahmed, 2012. "International Portfolio Diversification In Developing Equity Markets Of South Asia," Studies in Business and Economics, Lucian Blaga University of Sibiu, Faculty of Economic Sciences, vol. 7(1), pages 80-100, April.
  6. Marashdeh, Hazem, 2005. "Stock Market Integration in the MENA Region: An Application of the ARDL Bounds Testing Approach," Economics Working Papers wp05-27, School of Economics, University of Wollongong, NSW, Australia.
  7. Ahmed, Walid M.A., 2011. "Comovements and Causality of Sector Price Indices: Evidence from the Egyptian Stock Exchange," MPRA Paper 28127, University Library of Munich, Germany.
  8. Prasert Chaitip & Chukiat Chaiboonsri, 2009. "Thailand’s International Tourism Demand: The ARDL Approach to Cointegration," Annals of the University of Petrosani, Economics, University of Petrosani, Romania, vol. 9(3), pages 163-184.
  9. Ozdemir, Zeynel Abidin, 2009. "Linkages between international stock markets: A multivariate long-memory approach," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 388(12), pages 2461-2468.
  10. Ozdemir, Zeynel Abidin & Olgun, Hasan & Saracoglu, Bedriye, 2009. "Dynamic linkages between the center and periphery in international stock markets," Research in International Business and Finance, Elsevier, vol. 23(1), pages 46-53, January.
  11. Stelios D. Bekiros, 2013. "Decoupling and the Spillover Effects of the US Financial Crisis: Evidence from the BRIC Markets," Working Paper Series 21_13, The Rimini Centre for Economic Analysis.
  12. Dorota Witkowska & Krzysztof Kompa & Aleksandra Matuszewska-Janica, 2012. "Analysis of Linkages between Central and Eastern European Capital Markets," Dynamic Econometric Models, Uniwersytet Mikolaja Kopernika, vol. 12, pages 19-34.

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