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

Rakesh Gupta () and Francesco Guidi

International Review of Financial Analysis, 2012, vol. 21, issue C, 10-22

Abstract: This paper aims to explore links between the Indian stock market and three developed Asian markets (i.e. Hong Kong, Japan and Singapore) using cointegration methodologies in order to explore interdependence. We further estimate the time-varying conditional correlation relationships among these markets. We find that correlations rose dramatically during periods of crisis and return to their initial levels after the crisis. Finally, we investigated the presence of different volatility regime across stock markets. International investors may find useful to model their portfolio by also considering how volatile stock markets are. Results show that estimated probability of being in the low volatility state is the highest for all stock markets considered, as well as the probability to switch from a medium- to high-volatility state. Results suggest a short-run relationship and absence of a strong long-run relationship among these markets. Absence of long-run linkages among these markets may provide potential benefits for the investors that look at emerging markets to enhance their risk adjusted returns by including emerging markets in their portfolios.

Keywords: Stock markets; Cointegration; Time-varying correlations; India; Asian stock markets (search for similar items in EconPapers)
JEL-codes: C32 G15 (search for similar items in EconPapers)
Date: 2012
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (72)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S1057521911000822
Full text for ScienceDirect subscribers only

Related works:
Working Paper: Cointegration relationship and time varying co-movements among Indian and Asian developed stock markets (2011)
Working Paper: Cointegration relationship and time varying co-movements among Indian and Asian developed stock markets (2010)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:finana:v:21:y:2012:i:c:p:10-22

DOI: 10.1016/j.irfa.2011.09.001

Access Statistics for this article

International Review of Financial Analysis is currently edited by B.M. Lucey

More articles in International Review of Financial Analysis from Elsevier
Bibliographic data for series maintained by Catherine Liu ().