The IUP Journal of Applied Finance
Dynamics of Interdependencies of Asian Stock Markets: An Empirical Study

Article Details
Pub. Date : Jan, 2019
Product Name : The IUP Journal of Applied Finance
Product Type : Article
Product Code : IJAF21901
Author Name : Harshita Gupta, Dawa Sherpa and Rajbeer Kaur
Availability : YES
Subject/Domain : Finance
Download Format : PDF Format
No. of Pages : 15

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Abstract

The present paper explores the contemporary and contested issue of relationship existing between the international capital markets. The scope of the study was limited up to five emerging equity markets of Asia, namely, India, China, Japan, Indonesia, and Taiwan. To examine the dynamic interdependencies of the selected markets, tests of stationarity and cointegration were conducted. Unit root test was done using Augmented Dickey-Fuller test, Phillip-Perron test and Modified Dickey-Fuller 't' test. It was concluded that all stock prices were integrated of order one, i.e., I(1). Cointegration test was done using Johansen cointegration test and Gregory Hansen test for cointegration. The VAR Granger Causality test was used to detect any causality between two stock market prices. The findings implied that no substantial relationship exists between the stock markets of the selected Asian countries. However, evidence of bidirectional causality between JKSE stock price and N225 stock price was found through the application of Granger causality test.


Description

Equity market, more popularly known as stock market, is a platform through which trading of stocks of listed companies takes place. Companies that make their shares available for public trading through stock exchanges are called 'listed companies'. These stock exchanges not only provide the investors with a secured place offering fair dealings but also operate as clearing houses, thereby mitigating the risks involved, while boosting the investors' confidence. Furthermore, they prove to be an extremely useful source for drawing capital for the companies as well as play a major role in the economic conditions of a country.


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