Correlation dynamics in equity markets: evidence from India

S. Raja Sethu Durai and Saumitra Bhaduri

Research in International Business and Finance, 2011, vol. 25, issue 1, 64-74

Abstract: 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.

Keywords: Correlation; dynamics; Multivariate; GARCH; Logistic; trend; function (search for similar items in EconPapers)
Date: 2011
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Citations: View citations in EconPapers (14)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:riibaf:v:25:y:2011:i:1:p:64-74

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