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

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  • 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.

Suggested Citation

  • Paresh Narayan & Russell Smyth & Mohan Nandha, 2004. "Interdependence and dynamic linkages between the emerging stock markets of South Asia," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 44(3), pages 419-439.
  • Handle: RePEc:bla:acctfi:v:44:y:2004:i:3:p:419-439
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    1. Mohamed Ariff & Ahmed M. Khalid, 2000. "Liberalization, Growth and the Asian Financial Crisis," Books, Edward Elgar Publishing, number 1511.
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    Cited by:

    1. 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.
    2. Muhammad Mansoor Baig & Muhammad Bilal & Waheed Aslam, 2016. "Relationship between Major Developed Equity Markets and Major Frontier Equity Markets of World," Acta Universitatis Danubius. OEconomica, Danubius University of Galati, issue 12(1), pages 182-196, February.
    3. 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.
    4. 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.
    5. 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.
    6. 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.
    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. 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).
    9. 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.
    10. repec:eee:ecmode:v:64:y:2017:i:c:p:384-398 is not listed on IDEAS
    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, Rimini Centre for Economic Analysis.
    12. Florent DEISTING & Sanjay SEHGAL & Piyush PANDEY, 2017. "Time Varying Integration amongst the South Asian Equity Markets: An Empirical Study," Working Papers 2016-2017_7, CATT - UPPA - Université de Pau et des Pays de l'Adour, revised Apr 2017.
    13. 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.
    14. 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.
    15. Sriananthakumar, Sivagowry & Narayan, Seema, 2015. "Are prolonged conflict and tension deterrents for stock market integration? The case of Sri Lanka," International Review of Economics & Finance, Elsevier, vol. 39(C), pages 504-520.
    16. 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.
    17. Syed Muhammad Aamir Shah & Muhammad Husnain & Ashraf Ali, 2012. "Is Pakistani Equity Market Integrated to the Equity Markets of Group of Eight (G8) Countries? An Empirical Analysis of Karachi Stock Exchange," Romanian Economic Journal, Department of International Business and Economics from the Academy of Economic Studies Bucharest, vol. 15(45), pages 289-324, September.
    18. Kim Hiang Liow, 2008. "Financial Crisis and Asian Real Estate Securities Market Interdependence: Some Additional Evidence," Journal of Property Research, Taylor & Francis Journals, vol. 25(2), pages 127-155, November.

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