Journal of Management Research
Volume 1, Number 3 (May–August 2001)
ISSN: 0972-5814 Online ISSN: 0974-455X
Interrelationship between Indian and US Stock Markets
Bala Arshana Palli and Mukund S Kulkarni
| Abstract |
This study examines the nature and extent of linkage between the US and the Indian stock markets.
The study uses the theory of cointegration to study interdependence between the Bombay stock
exchange (BSE), and the NYSE and Nasdaq. The sample data consisted of daily closing prices for
the three indices from January 1991 through December 1999 with 2338 observations. The results
are in support of the intuitive hypothesis that the Indian stock market was not interrelated to the US
markets for the entire sample period. It should be noted that stock markets of many countries
became increasingly interdependent with the US stock markets during the same time period. India
was late in effecting liberalization policies and when it implanted these policies it did so in a careful
and slow manner. However, as the effects of economic liberalizations started to take place, the BSE
became more integrated with the Nasdaq and the NYSE, particularly after 1998. It must be noted
that though BSE stock market is integrated with the US stock markets, it does not influence the
Nasdaq and NYSE markets. This result is to be expected, given the relatively small valuation of the
BSE.
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