Is India's Stock Market Integrated
with Global and Major Regional Markets?
- - Janak Raj and Sarat Chandra Dhal
The stock market in India has witnessed a rapid growth, led by reforms, since the early 1990s and the surge in foreign portfolio
capital flows. This study investigates as to how the Indian stock market is integrated with global markets of the US, the UK and Japan
and major regional markets in Asia such as Singapore and Hong Kong. The study uses the popular multivariate cointegration model
to gauge the integration process. Empirical findings support that a single cointegration relation bounds these stock markets.
Moreover, cointegration of the Indian stock market with the global and regional markets holds for stock prices measured in US dollar rather
than local currency, attributable to the role of international portfolio investors and capital flows. There is evidence that India's
international integration has strengthened in the recent period beginning 2003. However, the integration of India's stock market with the
global markets, such as the US and the UK, is much higher than with the regional markets. Global and regional markets together
could account for the bulk of the total variation in India's stock market. The Indian stock market provides opportunity for higher return
than global and regional markets, reflecting strong fundamentals and long-horizon investment opportunities in the recent period. From
a policy perspective, the findings of the study would prove useful in terms of crucial information inputs for monitoring financial
integration and developing the markets further.
© 2009 IUP. All Rights Reserved.
Property Investment and Inflation Hedging
in Residential Property:
The Case of District of Gombak, Selangor D. E.
-- Izani Ibrahim,
Sheela Devi D Sundarasen
and Ahmad Faisal Hj.
Ahmad Shayuti
This study analyzes the effectiveness of
property investment in hedging against inflation. Pooled Estimated Generalized Least
Square (EGLS with cross-section weights) models are used to determine whether investing in property is a good hedge against inflation. In
this model, the total pool (unbalanced) observations considered are 10,431 residential properties. On the whole, this study considers
16 types of properties and 118 housing schemes. Three models are used to determine inflation, expected inflation, and unexpected
inflation. The results of the study indicate that the return on residential property is lower than inflation and that it is not a good hedge
against inflation. This finding applies only to the location and the types of properties considered in this study. However, in general, it can
be concluded that investment in residential properties through buy-and-sell is a better strategy. The results also indicate that there may
be other factors affecting the property returns besides inflation.
© 2009 IUP. All Rights Reserved.
Company Attributes and Stock Returns in India:
A Panel Data Analysis
- - Rohini Singh
Multi-factor models have been proposed as an alternative to the Capital Asset Pricing Model (CAPM), which uses beta as the
single measure of risk. This paper relates stock returns to the underlying behavior of beta and five company attributes, i.e., size,
earnings yield, cash earnings yield, dividend yield, and book-to-market ratio. Contrary to the CAPM, beta was not found to be
statistically significant. Size and book-to-market ratio were found to be significant in the individual regressions, and only size was significant in
the multivariate analysis. The study indicates that risk is multidimensional, and researchers and decision makers should not depend
on beta alone.
© 2009 IUP. All Rights Reserved.
Covered Interest Parity and International
Financial Integration: The Case of India
- - Preeta George and Debasis Mallik
This study seeks to examine the factors responsible for the lack of international financial integration in India using the covered
interest parity condition. The study reveals that the international oil price, Real Effective Exchange Rate (REER), interest rate differential
and current account openness are the most important variables affecting the forward premium in India. In an era of financial
globalization, it is the current account-related and trade-related factors which have a greater impact on the forward premium than the
capital account-related factors.
© 2009 IUP. All Rights Reserved.
|
