Market Linkage of Indian Stock Market with Select Stock Markets

Abstract

This paper examines the market linkage and volatility estimation of Indian stock market with selected stock markets in the world by using various econometric models from the period of 1st April 2000 to 31st March 2018. The result suggests that Indian market positively correlated with the other selected stock markets. Indian stock market has significant influence with two out of five markets in the short run. In the long run relationship, there is no linkage between markets. However, there exists bidirectional causality in the markets. Also, there is market price volatility, and the clustering effect was found in all the major markets. From the study, it is apparent that the Indian stock market has an impact on the other stock market, in the short run. Hence, investors have the opportunity to reap the benefits of the portfolio diversification by gaining knowledge from market integration.