Long-term Association of Stock Markets of Different Nations: An Empirical Study

Abstract

Globalization has its own problems. Though, it was brought as a solution to many issues and going to be a life changer. It was like that but along with that, globalization has integrated the world and any problem coming to one corner gets percolated to other corners of the world soon. In stock market this issue is more prominent because stock market works on information which is reflected in the share prices. In this article the impact of long-term integration among the stock markets is studied. Johansen’s Co-integration test in Vector Auto Regressive (VAR) framework has been used to establish the long-term association among the stock markets. Financial crisis of 2008 has been used as reference point and comparison in the long-term association has been studied. It was found that the long-term association is present and has been decreased after the crisis.