Correlation dynamics in equity markets: evidence from India
This study is aimed at understanding the correlation dynamics of the equity markets from a developing country perspective using daily data from July 1997 to August 2006. A simple unconditional correlation estimate and dynamic time varying correlation estimate from a DCC-MVGARCH of Engle and Sheppard (2001) are derived for S&P CNX Nifty and other 10 world indices that includes four developed and six Asian country indices. The results show low correlation across S&P CNX Nifty with both Asian and developed nations. In addition a Logistic Smooth Transition Regression (LSTR) model is implemented and finds that the S&P CNX Nifty index is moving towards a better integration with other world markets but not at a very noteworthy phase. The low correlation provides space for the global funds to diversify risk in Indian markets.
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Robert F. Engle & Kevin Sheppard, 2001.
"Theoretical and Empirical properties of Dynamic Conditional Correlation Multivariate GARCH,"
NBER Working Papers
8554, National Bureau of Economic Research, Inc.
- Engle, Robert F & Sheppard, Kevin K, 2001. "Theoretical and Empirical Properties of Dynamic Conditional Correlation Multivariate GARCH," University of California at San Diego, Economics Working Paper Series qt5s2218dp, Department of Economics, UC San Diego.
- Roger Ignatius, 1992. "The Bombay Stock Exchange: Seasonalities and Investment Opportunities," Indian Economic Review, Department of Economics, Delhi School of Economics, vol. 27(2), pages 223-227, July.
- Chelley-Steeley, Patricia, 2004. "Equity market integration in the Asia-Pacific region: A smooth transition analysis," International Review of Financial Analysis, Elsevier, vol. 13(5), pages 621-632.
- Koutmos, Gregory & Booth, G Geoffrey, 1995. "Asymmetric volatility transmission in international stock markets," Journal of International Money and Finance, Elsevier, vol. 14(6), pages 747-762, December.
- Geert Bekaert & Campbell R. Harvey, 2000. "Capital Flows and the Behavior of Emerging Market Equity Returns," NBER Chapters,in: Capital Flows and the Emerging Economies: Theory, Evidence, and Controversies, pages 159-194 National Bureau of Economic Research, Inc.
- Geert Bekaert & Campbell R. Harvey, 1998. "Capital Flows and the Behavior of Emerging Market Equity Returns," NBER Working Papers 6669, National Bureau of Economic Research, Inc.
- Goetzmann, William N. & Jorion, Philippe, 1999. "Re-Emerging Markets," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 34(01), pages 1-32, March.
- William N. Goetzmann & Philippe Jorion, 1997. "Re-emerging Markets," NBER Working Papers 5906, National Bureau of Economic Research, Inc.
- William Goetzmann & Philippe Jorion, 1998. "Re-emerging Markets," Yale School of Management Working Papers ysm50, Yale School of Management, revised 01 Aug 2000.
- Philippe Jorion & William N. Goetzmann, 1998. "Re-Emerging Markets," Yale School of Management Working Papers ysm111, Yale School of Management.
- Eun, Cheol S. & Shim, Sangdal, 1989. "International Transmission of Stock Market Movements," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 24(02), pages 241-256, June.
- Lin, Chien-Fu Jeff & Terasvirta, Timo, 1994. "Testing the constancy of regression parameters against continuous structural change," Journal of Econometrics, Elsevier, vol. 62(2), pages 211-228, June.
- Kearney, Colm & Poti, Valerio, 2006. "Correlation dynamics in European equity markets," Research in International Business and Finance, Elsevier, vol. 20(3), pages 305-321, September.
- Colm Kearney & Valerio Poti, 2005. "Correlation Dynamics in European Equity Markets," Finance 0507008, EconWPA.
- Ripley, Duncan M, 1973. "Systematic Elements in the Linkage of National Stock Market Indices," The Review of Economics and Statistics, MIT Press, vol. 55(3), pages 356-361, August.
- Chelley-Steeley, Patricia L., 2005. "Modeling equity market integration using smooth transition analysis: A study of Eastern European stock markets," Journal of International Money and Finance, Elsevier, vol. 24(5), pages 818-831, September.
- Lessard, Donald R, 1974. "World, National, and Industry Factors in Equity Returns," Journal of Finance, American Finance Association, vol. 29(2), pages 379-391, May.
- Panton, Don B. & Lessig, V. Parker & Joy, O. Maurice, 1976. "Comovement of International Equity Markets: A Taxonomic Approach," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 11(03), pages 415-432, September.
- Kearney, Colm & Lucey, Brian M., 2004. "International equity market integration: Theory, evidence and implications," International Review of Financial Analysis, Elsevier, vol. 13(5), pages 571-583.
- Wing-Keung Wong & Aman Agarwal & Jun Du, 2005. "Financial Integration for India Stock Market, a Fractional Cointegration Approach," Departmental Working Papers wp0501, National University of Singapore, Department of Economics.
- Engle, Robert, 2002. "Dynamic Conditional Correlation: A Simple Class of Multivariate Generalized Autoregressive Conditional Heteroskedasticity Models," Journal of Business & Economic Statistics, American Statistical Association, vol. 20(3), pages 339-350, July. Full references (including those not matched with items on IDEAS)