Stock Market Growth Link in Asian Emerging Countries: Evidence from Granger Causality and Co-integration Tests

Monalisha Pattnaik () and Padmabati Gahan ()
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Monalisha Pattnaik: Sambalpur University, Department of Statistics School of Mathematical Sciences
Padmabati Gahan: Sambalpur University, Department of Business Administration

A chapter in Advances in Growth Curve and Structural Equation Modeling, 2018, pp 21-44 from Springer

Abstract: Abstract For both risk management and foreign equity portfolio investment purposes, financial integration of Indian stock market is crucial especially among seven dominant players in the Asian emerging stock markets. The purpose of this paper is to examine the evidence on the integration of Indian stock market with other Asian emerging stock market prices. Daily time series data spanning the period from December 2000 to March 2016 has been used. The unit root test, the co-integration test and the Granger causality test for testing cause–effect relationship of India with the set of seven country stock price indices, including that of Hong Kong, Indonesia, Malaysia, South Korea, Philippines, China and Taiwan have been applied to derive the long-run and short-term equilibrium relationships. The findings of the study establish that there is not any evidence of co-integration between India and the other countries like Malaysia, Philippines and China in the sample; however, there is strong evidence of co-integration between India and these countries like Hong Kong, Indonesia, South Korea and Taiwan. It is shown that the stock markets of India with Hong Kong, Indonesia, South Korea and Taiwan do have a long-run relationship. Through multivariate co-integration test, it is concluded that Philippines stock market influences both the Indian stock market and Hong Kong stock market positively and significantly where Taiwan stock market influences both the Indonesian stock market and Malaysian stock market positively and significantly. Through Granger causality test, it is clear that the Indian capital market is not getting significantly affected by all of the emerging market economies. The study emphasises on the evidence of long-run equilibrium relationships among emerging Asian economies.

Keywords: Stock markets; Co-integration; Emerging Asia (search for similar items in EconPapers)
Date: 2018
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DOI: 10.1007/978-981-13-1843-6_2

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