Abstract
Purpose: The increasing trade integration between nations leads to a higher level of economic and financial integration among them. This research aims to explore the dynamic connections between India's stock market and its major Asian trading partners, including China, Japan, Korea, Thailand, and Turkey.
Design/methodology/approach: The study used daily closing values of the main stock indices from January 2002 to December 2021 for the selected countries. To assess the stock market data's stability, the ADF unit root test was employed. Furthermore, a correlation test was conducted to examine short-term associations, and the ARDL cointegration test was applied to investigate long-term associations among the stock markets.
Findings: The results revealed that the Indian stock market exhibited significant associations and integration with the markets of its Asian trading partners, indicating that trade integration also fosters financial integration.
Originality: The study is the first attempt to explore the dynamic association among the stock market of India and its major Asian trading partners. The results would be relevant for the investors seeking diversification benefits and for policymakers also. Existence of long term association among the markets suggest that diversification among these markets would not provide fruitful returns in long run and the trading relations among the nations does matter for integrating its stock markets as well.