Financial Market Integration of South Asian Countries

Abstract

The present study observes the relationship between Indian stock markets and some leading South Asian countries based on believed whether Indian equity market is more proficient than the other south Asian markets. Financial market integration has provoked the challenges to emerging economies to grow at an extraordinary pace for promoting domestic savings, foreign capital inflows and economic growth. To explore these relationships we have used the daily stock indices from August, 2002 to August, 2011 by applying bivariate and multivariate co-integration tests and the Granger causality tests. The result shows both long-run and short-run association among the selected markets. The investors can reap benefit during short-run rather than in the long-run.

Keywords: Stock Markets, Stock Prices, Developing Countries, Multivariate Co-integration, Granger Causality