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Asian Journal of Management
Year : 2024, Volume : 15, Issue : 1
First page : ( 39) Last page : ( 44)
Print ISSN : 0976-495X. Online ISSN : 2321-5763.
Article DOI : 10.52711/2321-5763.2024.00007

Stock market integration among trading partners: Empirical evidence from India and China

Eronimus A.1, Verma Reetika2,*

1Assistant Professor, Department of Financial Administration, Central University of Punjab, Bathinda, Punjab, India

2Research Scholar, Department of Financial Administration, Central University of Punjab, Bathinda, Punjab, India

*Corresponding Author E-mail: reetikaverma20@gmail.com

Online published on 16 April, 2024.

Abstract

This study makes an attempt to analyse the dynamics of integrating relationship shared by Indian and Chinese stock market for the period ranging from January 01, 2002 to June 30, 2021. Prominent stock indices namely BSE SENSEX index of Bombay Stock Exchange Limited, India and Shanghai Stock Exchange Composite Index (SCI) of Shanghai Stock Exchange Limited, China were considered. Johansen Cointegration test was used to analyse the long term integration shared by the stock markets. Granger causality test was employed to know the causal relation shared by the stock markets. Presence of long term integration and unidirectional causal relation between the stock markets was found. It may be inferred that investment diversification among these markets may not provide fruitful returns to the investors in long run. Presence of causality from BSESENSEX to SCI and absence of causality from SCI to BSESENSEX suggests significant flow of information from Indian stock market to the Chinese stock market but not vice-versa. Findings of the study also suggests that extent of connectedness shared by the Indian and Chinese market does not vary too much with time. The findings revealed that although the financial markets of trading partners share significant integration but the intensity of trade does not impact the extent of financial linkages shared by the nations. These implications may provide significant insights to the investors, fund’s managers, policymakers and other market players.

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Keywords

Stock market integration, Trading partners, India, China, Investment diversification.

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