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Cointegration relationship and time varying co-movements among Indian and Asian developed stock markets

This paper aims to explore links between the Indian stock market and three developed Asian markets (i.e. Hong Kong, Japan and Singapore). The index prices are non-stationary so we used cointegration methodologies in order to explore interdependencies. Johansen methodologies reject the hypothesis of long-run relationships among all stock markets, while the Gregory-Hansen test rejects the hypothesis of no cointegration with structural breaks. Our results suggest that in the long-term the benefits for investing in India are limited. We further estimated the time-varying conditional correlation relationships among these markets We find that correlations rise dramatically during periods of crisis, while they return to their initial levels after those periods.

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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 19853.

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Date of creation: Jan 2010
Handle: RePEc:pra:mprapa:19853
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