THE STUDY ON CO-MOVEMENT & INTERDEPENDENCY OF INDIAN STOCK MARKET WITH SELECTED FOREIGN STOCK MARKETS

ABSTRACTBombay stock exchange is one of the oldest markets in world. Various markets may have impact on each other. Study was done to examine the causal relationship among equity markets to better understand how shocks in one market are transmitted to other markets. study was done by taking stock price data of BSE, FTSE, Hangseng, JKSE, NIKKEI, CSE, SMI, SSE and TSEC Stock Market from 4/1/2001 to till 29/12/2011.The Correlation Shows that BSE is highly correlated with FTSE (96%), HANGSENG (95%), JKSE (95%), TSEC (87%), CSE (82%) & SSE (73%). ADF Test revels that the null hypothesis of first difference of series of all indices cannot be accepted at 5% level and 10% significant level as t-statistic values are less than critical values. granger causality test reveal that BSE is not affected by any of the selected market & BSE causes to FTSE, Hangseng, JKSE, CSE, and TSEC.It means that these markets are dependent on BSE.Keywords: Interdependence, Co movement, Granger causality test, Correlation(ProQuest: ... denotes formulae omitted.)INTRODUCTION:Bombay Stock Exchange is popularly known as the BSE. It was established as The Native Share & Stock Brokers' Association in 1875. FTSE Bursa Malaysia Index is a comprehensive range of real-time indices, which cover all eligible companies listed on the Bursa Malaysia Main Board which was introduced to Bursa Malaysia's investors on 2006. Hangseng Index is a free float-adjusted market capitalization-weighted stock market index in Hong Kong. It is used to record and monitor daily changes of the largest companies of the Hong Kong stock market. Indonesia Stock Exchange is a stock exchange based in Jakarta, Indonesia. It was previously known as Jakarta Stock Exchange (JSX) before its name changed in 2007 after merging with Surabaya Stock Exchange (SSX). Nikkei is a stock market index for the Tokyo Stock Exchange (TSE). It has been calculated continuously since September 7, 1950. Colombo Stock Exchange (CSE) is the main stock exchange in Sri Lanka. It is one of the most modern exchanges in South Asia, providing a fully automated trading platform. Swiss Market Index (SMI) is Switzerland's blue-chip stock market index, which makes it the most important in the country. Shanghai Stock Exchange (SSE) was founded on Nov. 26th, 1990 and in operation on Dec.19th the same year. It is a membership institution directly governed by the China Securities Regulatory Commission (CSRC). Taiwan Stock Exchange Corporation is a financial institution, located in Taipei 101, in Taipei, Taiwan. TSEC was established in 1961 and began operating as a stock exchange on 9 February 1962.LITERATURE REVIEW:A study was done by Michalis Glezakos, Anna Merika & Haralambos Kaligosfiris on, Interdependence of Major World Stock Exchanges: How is the Athens Stock Exchange Affected? interdependency among major world financial markets is more than evident. paper covers the period 2000-2010 using monthly data and investigates and examines the short and long-run relationships between major world financial markets with particular attention to the Greek stock exchange. research methodology employed includes testing for stationarity, both with the Dickey- Fuller and the Phillips-Perron tests, the use of a VAR model for the implementation of the Granger Causality test, and Co integration tests according to Johansen-Juselious. results confirm the dominance of the USA financial market and the strong influence of DAX and FTSE on all other markets of the sample. influence of Germany and the DJ index is especially noticeable on the Athens stock exchange.Ismail Aktar has done a study on, Is there any Co movement Between Stock Markets of Turkey, Russia and Hungary? This study investigates whether there exists long run relationship and Granger Causality between Turkish, Russian and Hungarian stock indices for the period of January 5, 2000 and October 22, 2008. …