International Equity Market Integration

Abstract

The Indian stock market is one of the earliest in Asia, being in operation since 1875, but remained largely outside the global integration process until the late 1980s. In this context, international equity market integration is a topic that has been extensively researched, but still holds much interest from an academic and financial standpoint. The paper, using a Logistic Smooth Transition Regression method, estimates not only the extent of correlation between returns but also the pace of integration. The results suggest that there does exist a very small degree of correlation between the Indian markets and other world markets. However, the pace of the integration is insignificant in most of the cases.