Co-integration of Karachi Stock Exchange (KSE) With Major Asian Markets

Asma Sarfraz (), Sumbal Shehzadi (), Haroon Hussain () and Mohsin Altaf ()
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Asma Sarfraz: University of Sargodha, Pakistan
Sumbal Shehzadi: University of Sargodha, Pakistan
Haroon Hussain: University of Sargodha, Pakistan
Mohsin Altaf: University of Sargodha, Pakistan

Acta Universitatis Danubius. OEconomica, 2012, issue 5(5), 118-129

Abstract: The purpose of this research is to study the long run relationships and co movement among the stock markets of Pakistan and other Asian stock markets i. e. India, Malaysia and Indonesia. Over the period of Jan 1, 1998 to October 3, 2011. This paper examines the co-movement among stock markets of Pakistan, India, Malaysia and Indonesia. Descriptive statistics, correlation, co-integration tests are run to check the behavior and co movement of markets. Granger causality test is used to check the lead lag relationship. Impulse response tells about the one standard deviation change in market bring what standard deviation change in other market. Variance decomposition technique is used to decompose the variance in one market due to change in another market and due to its own dynamics i. e. economic and political conditions also affect the market. The results shows that the four markets Pakistan, India, Malaysia and Indonesia are weakly correlated with each other and find no co-integration. Variance decomposition shows that most of the change in above listed countries is due to their own factors. Number of studies has been conducted on developed markets like United States of America, United Kingdom, France, Japan Canada and underdeveloped countries, but this paper focuses on emerging markets of Asia.

Keywords: Co-integration; augmented dickey fuller test; Phillips perron; granger causality; variance decomposition (search for similar items in EconPapers)
Date: 2012
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