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Global Stock Markets Development and Integration: with Special Reference to BRIC Countries

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  • Chittedi, Krishna Reddy

Abstract

In a country like India where the stock market is undergoing significant transformation with liberalization measures, and the analysis of the nature of integration with other developed and emerging markets would not only give an idea of the possible gains to be reaped out of portfolio diversification from Indian market, but may also provide some indication of the vulnerability of the country’s stock market in case of a regional financial crisis and consequent reversal of capital flows from the region. In the context the study examined the integration of the stock market among the BRIC (Brazil, Russia, India and China) economies in general and their integration with the developed countries stock markets such as US, UK and Japan, which can be analyzed by using the Granger causality, Johansen co integration and Error correction Mechanism methodology, based on daily data for the period January1998- Aug 2009. The results of co integration shows co integration relationship found between BRIC countries and Developed countries namely USA, UK and Japan. The results of Error correction model reveal that Sensex, Nikki225, moscowtimes, FTSE 100, and Bovespa are significant. It implies that these markets share the forces of short run adjustment to long run equilibrium.

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Bibliographic Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 18602.

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Date of creation: 08 Mar 2009
Date of revision: 06 Sep 2009
Handle: RePEc:pra:mprapa:18602

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Keywords: Stock Market integration; Johansen Julius co integration test; ECM; Engel Granger Casualty test; emerging countries; developed countries;

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  1. Levy, Haim & Sarnat, Marshall, 1970. "International Diversification of Investment Portfolios," American Economic Review, American Economic Association, vol. 60(4), pages 668-75, September.
  2. Kasa, Kenneth, 1992. "Common stochastic trends in international stock markets," Journal of Monetary Economics, Elsevier, vol. 29(1), pages 95-124, February.
  3. Chowdhury, Abdur R., 1994. "Stock market interdependencies: Evidence from the asian NIEs," Journal of Macroeconomics, Elsevier, vol. 16(4), pages 629-651.
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Cited by:
  1. Marcelo Bianconi & Joe A. Yoshino & Mariana O. Machado de Sousa, 2011. "BRIC and the U.S. Financial Crisis: An Empirical Investigation of Stocks and Bonds Markets," Discussion Papers Series, Department of Economics, Tufts University 0764, Department of Economics, Tufts University.
  2. Chittedi, Krishnareddy, 2011. "Does oil price matter for Indian stock markets?," MPRA Paper 35334, University Library of Munich, Germany, revised 01 Dec 2011.
  3. Saha, Malayendu & Bhunia, Amalendu, 2012. "How far India has gone down the road towards financial integration with US since subprime crisis? An Econometric Analysis," MPRA Paper 38731, University Library of Munich, Germany.

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