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Financial Risk Management

Cointegration of Developed Economies and Indian Stock Market After Economic Reforms

Article Details

Pub. Date	: Jun, 2019
Product Name	: The IUP Journal of Financial Risk Management
Product Type	: Article
Product Code	: IJFRM31906
Author Name	: R Kumara Kannan and Selvam Jesiah
Availability	: YES
Subject/Domain	: Finance Management
Download Format	: PDF Format
No. of Pages	: 13

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Abstract

The main purpose of the paper is to investigate whether and to what extent the Bombay Stock Exchange (BSE), India is integrated with the major mature markets in the US, UK, Germany and Japan. The dataset has been divided into: post Asian Crisis but before Euro Emerged (July 1997- January 2002); after Euro but before US Subprime Crisis (February 2002-November 2007); from the US Subprime Crisis before Modi’s emergence as national leader (December 2007-April 2014); and after Modi’s emergence (May 2014-July 2016). The study uses unit root test, Johansen-Juselius test, GARCH(p, q) model estimation, and Granger causality test for the purpose.

Description

India as the fastest developing economy has been very keen in attracting Foreign Direct Investment (FDI). This increase in FDI witnessed by India during the past few decades, was well supported by major economic reforms taken up in the 1990s. The major advantages in attracting FDI are: India gets advanced technology and developed economies’ managerial expertise; Indian employees get well-trained in the latest technology; and India gets to avail global production facilities and large markets.