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Short-run and long-run dynamic linkages between Indian and US stock markets

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  • Shilpa Goyal
  • Anand Bansal

Abstract

The integration of international financial markets is a widely researched topic which has drawn the focus of researchers worldwide. The purpose of the paper is to investigate the co-movement between Indian and US stock markets using closing daily values of Dow Jones Industrial Average and the S%P 500 index for the USA and the BSE SENSEX and CNX NIFTY for the Indian markets. The interlinkage was investigated using the Johansen's cointegration test, Granger causality test, VAR model and variance decomposition analysis after conducting the unit root test. The outcome of Johansen's cointegration test indicates that no long-run equilibrium relationship exists between the Indian and US stock markets. Further, unidirectional causality runs from the USA to India hence the returns of the US market influenced the Indian market returns but vice versa does not hold true. The results have implications for investors who can get the benefits from portfolio diversification in the short and long-run in the US market.

Suggested Citation

  • Shilpa Goyal & Anand Bansal, 2019. "Short-run and long-run dynamic linkages between Indian and US stock markets," International Journal of Indian Culture and Business Management, Inderscience Enterprises Ltd, vol. 19(3), pages 319-338.
    • Handle: RePEc:ids:ijicbm:v:19:y:2019:i:3:p:319-338
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    Cited by:

    1. Rehman, Mobeen Ur & Ahmad, Nasir & Shahzad, Syed Jawad Hussain & Vo, Xuan Vinh, 2022. "Dependence dynamics of stock markets during COVID-19," Emerging Markets Review, Elsevier, vol. 51(PB).

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