The Linkage between Chittagong Stock Market and Dhaka Stock Market

2021 ◽  
Vol 1 (1) ◽  
Author(s):  
Muhammad Shahidullah Tasfiq ◽  
◽  
Nasrin Jahan
Keyword(s):  
Stock Market ◽  
Stock Markets ◽  
Stock Price ◽  
Impulse Response Function ◽  
Decomposition Analysis ◽  
Variance Decomposition ◽  
Causality Test ◽  
Long Run ◽  
Short Run ◽  
Variance Decomposition Analysis

This paper aims at determining the relationship between the two domestic stock markets of Bangladesh – the Chittagong Stock Market (CSE) and the Dhaka Stock Market (DSE). The daily stock price indices that represent the performance of the two stock markets are collected. In order to find out the interdependent relationship, the Engle-Granger Cointegration test, Granger Causality test, Impulse Response Function, and Variance Decomposition Analysis are employed in this paper. The main finding of this study is that both the stock markets are related in the long run. However, there is a one-way short-run effect from the DSE on the CSE market. The CSE market quickly responds to the shock in the DSE market. But, the DSE market is not responsive to the CSE market. The variance decomposition analysis shows that most of the shocks in the CSE market are explained by its own market. On the other hand, a small number of shocks in the DSE market are explained by the CSE market as well as its own market.

scholarly journals AN ANALYSIS OF STOCK MARKET INTEGRATION IN THE ASIAN DEVELOPED AND EMERGING MARKETS

2021 ◽  
Vol 9 (3) ◽  
pp. 1175-1190
Author(s):  
Sadiq Rehman ◽  
Asif Ali Abro ◽  
Ahmed Raza Ul Mustafa ◽  
Najeeb Ullah ◽  
Sanam Wagma Khattak
Keyword(s):  
Stock Market ◽  
Emerging Markets ◽  
Stock Markets ◽  
Impulse Response Function ◽  
Variance Decomposition ◽  
Short Term ◽  
Emerging Stock Markets ◽  
Long Run ◽  
Integration Test ◽  
Short Run

Purpose of the study: This study investigates Short-run, Long-run, and Casual relationships in the Asian Developed and Emerging stock market indices for the period of 19 years weekly data of stock market indices of Asian Developed and Emerging Markets which are Japan (Nikkei 225), South Korea (KOSPI), Pakistan (KSE 100), China (SSE Composite), Sri Lanka (ASPI), India (BSE 200) and Malaysia (KLSE composite) from January 2001 to December 2019. Methodology: To analyze long-run and short-run relationships among the Asian developed and emerging stock markets, this study practices Descriptive Statistics, Correlation Matrix, Unit Root Test, Johansen Co-Integration Test, Vector Error Correction Model, Granger Causality test, Variance Decomposition and Impulse Response Function (IRF). Main findings: By employing the ADF and P.P. tests, the results specify that the entire variables' data are non-stationary and stationary in exact order, which is 1st difference. The Johnson Co-integration test found one cointegration relationship, where the results are consistent with Granger causality, Variance Decomposition, and Impulse Response Function (IRF). Application of the study: As the current research has focused on finding out the comovements in the Asian developed and emerging markets. So, the applications are that the survey found short-run and long-run relationships in these countries' stock markets. The study's originality: The current study has selected seven Asian developed and emerging stock markets and weekly updated time series data to investigate short-term and long-term linkages. So, this study found long-run comovements in these stock indices, which contributes to the literature. In addition, these stock markets have limited diversification benefits for international investors, while short-term diversification benefits may exist.

A Sectoral Analysis of the Role of Stock Market Development on Economic Growth: Empirical Evidence from Indian Economy

2017 ◽  
Vol 18 (4) ◽  
pp. 911-923 ◽  
Author(s):  
Madhu Sehrawat ◽  
A.K. Giri
Keyword(s):  
Economic Growth ◽  
Stock Market ◽  
Stock Prices ◽  
Stock Price ◽  
Time Series Data ◽  
Trade Openness ◽  
Series Data ◽  
Causality Test ◽  
Long Run ◽  
Short Run

The present study examines the relationship between Indian stock market and economic growth from a sectoral perspective using quarterly time-series data from 2003:Q4 to 2014:Q4. The results of the autoregressive distributed lag (ARDL) approach bounds test confirm the existence of a cointegrating relationship between sector-specific gross domestic product (GDP) and sector-specific stock indices. The empirical results reveal that sector-specific economic growth are significantly influenced by changes in the respective sector-specific stock price indices in the long run as well as in the short run. Apart from that, the control variables, such as trade openness and inflation, act as the instrument variables in explaining the variations in the sector-specific GDP of the economy. The results of Granger causality test demonstrate unidirectional long-run as well as short-run causality running from sector specific stock prices to respective sector GDP. The findings suggest that economic growth of the country is sensitive to respective sub-sector stock market investments. The findings highlight the reasons for cyclical and counter-cyclical business phase for the overall economy.

Cointegration of Asian Stock Markets: Empirical Evidence from India

2016 ◽  
Vol 6 (2) ◽  
Author(s):  
Beeralaguddada Srinivasa Veerappa
Keyword(s):  
Stock Market ◽  
Stock Returns ◽  
Stock Markets ◽  
Causality Test ◽  
Long Run ◽  
Equilibrium Relationship ◽  
Short Run ◽  
Auto Regressive ◽  
Global Stock Markets ◽  
Indian Stock Market

At present stock return is significantly related to other global stock markets. The present paper empirically investigates the short run and long run equilibrium relationship between the stock market of India, Japan Hong Kong, Singapore, Malaysia, China, and Australia monthly data during January 1995 to December 2013. Researcher employs correlation test, multivariate co-integration framework, Vector Auto Regressive error-correction model and Granger causality test with reference to financial up evils in Asia and world viz., Asian crisis (1997/98), financial crisis (2008) Inflation conditions, Natural disasters, financial up evils etc. of long run relationship. Results find that the Indian stock market return is significantly co-integrated with long run and short run situations/causalities in Asian Stock returns.

Contagion Effects on Stock Market of Bangladesh

2017 ◽  
Vol 8 (2) ◽  
pp. 1-14 ◽  
Author(s):  
Mohammad Ashraful Ferdous Chowdhury ◽  
Md. Mahmudul Haque ◽  
Md. Nazrul Islam
Keyword(s):  
Stock Market ◽  
Stock Markets ◽  
Global Economy ◽  
Global Financial Crisis ◽  
Impulse Response Function ◽  
Dynamic Relationship ◽  
Contagion Effects ◽  
Long Run ◽  
Integration Test ◽  
Short Run

Due to increased globalization and economic integration in the global economy, contagion effects have been considered an important matter for the investors and policymakers. In the wake of the global financial crisis of September 2008, Islamic financial products were thrust into the spotlight as alternatives to the shaken conventional equity markets. The objective of this study is to discover the Islamic stock market dynamics of Bangladesh with the global Islamic stock markets such as Saudi Arabia, UAE, Kuwait, Europe, UK and Japan. For understanding long run relationship or the theoretical relationships among the Islamic stock market and short run co-movements among Islamic stocks, Johansen co-integration test and Vector Error Correction model (VECM) have been applied respectively. Furthermore, the investigation on short run dynamics is also carried through Impulse Response Function (IRF) analyses. The study found that the Japanese Islamic Stock market is affected to changes in other Islamic stock markets while Kuwait stock market is the leader in the sense it affects other stock market greatly. Bangladeshi Islamic stock market is found to be marginally affecting other stock markets but not as strong as Kuwait. Global Islamic stock market seems to have very little impact to Bangladesh Islamic stock market. The evidence of co-integration and short run dynamics help a diversification benefit may be derived from the cross boarder investment. The empirical evidence of co-integration and short run dynamic relationship found in this study will help investors in making efficient investment decisions and also enhance their understanding of market behavior.

Dynamic Interaction Between Macroeconomic Fundamentals and Stock Prices in Bangladesh

2018 ◽  
Vol 1 (1) ◽  
pp. 66
Author(s):  
Mostafa Ali ◽  
Gang Sun ◽  
Mohammed Ali Arshad Chowdhury
Keyword(s):  
Stock Prices ◽  
Stock Price ◽  
Negative Relationship ◽  
Decomposition Analysis ◽  
Variance Decomposition ◽  
Cointegration Test ◽  
Response Analysis ◽  
Macroeconomic Variables ◽  
Long Run ◽  
Short Run

This study attempts to investigate whether dynamics in fundamental macroeconomic factors significantly influence the stock prices of Bangladesh by applying cointegration test, Granger causality test based on the Vector Error Correction Model (VECM), Variance Decomposition and Impulse Response Analysis. Johansen and Juselius cointegration test detect six cointegrating vectors and a short-run and long-run relationship is investigated by normalizing the first cointegrating vector corresponding to the largest Eigen-value. We find a long-run positive relationship between stock price and IP, CPI, EX, and RT but a negative relationship between stock price and M2 and interest rate (both TB & GB). Empirical findings of this study reveal that no macroeconomic variables except TB Granger cause stock price in short run. Variance Decomposition analysis shows that most of the stock price variance can be explained by its own shocks in the shorter horizon but its magnitude diminishes over the long horizon which is about 26.77% after 24 months.  Therefore, empirical results suggest that stock prices are weakly exogenous relative to the macroeconomic variables. Findings of the study have important implications to market participants and financial analysts when they have chosen to invest in Bangladesh stock market.

Cointegration of Asian Stock Markets: Empirical Evidence from India

GIS Business ◽  
2016 ◽  
Vol 11 (5) ◽  
pp. 25-40
Author(s):  
Beeralaguddada Srinivasa Veerappa
Keyword(s):  
Stock Market ◽  
Stock Returns ◽  
Stock Markets ◽  
Causality Test ◽  
Long Run ◽  
Equilibrium Relationship ◽  
Short Run ◽  
Auto Regressive ◽  
Global Stock Markets ◽  
Indian Stock Market

At present stock return is significantly related to other global stock markets. The present paper empirically investigates the short run and long run equilibrium relationship between the stock market of India, Japan Hong Kong, Singapore, Malaysia, China, and Australia monthly data during January 1995 to December 2013. Researcher employs correlation test, multivariate co-integration framework, Vector Auto Regressive error-correction model and Granger causality test with reference to financial up evils in Asia and world viz., Asian crisis (1997/98), financial crisis (2008) Inflation conditions, Natural disasters, financial up evils etc. of long run relationship. Results find that the Indian stock market return is significantly co-integrated with long run and short run situations/causalities in Asian Stock returns.

Money Supply and Equity Price Movements During the Liberalized Period in India

2018 ◽  
Vol 21 (1) ◽  
pp. 108-123
Author(s):  
Tarak Nath Sahu ◽  
Krishna Dayal Pandey
Keyword(s):  
Error Correction ◽  
Money Supply ◽  
Stock Prices ◽  
Function Analysis ◽  
Correction Term ◽  
Impulse Response Function ◽  
Decomposition Analysis ◽  
Causality Test ◽  
Long Run ◽  
Short Run

This study attempts to contribute towards the prevalent understanding and the extant literatures on the effect of changes in money supply as an important monetary policy shock on the stock prices of India by using a time-varying parameter models with vector autoregressive specification during the period 1996 to 2016. The result of Johansen’s cointegration test suggests a significantly positive long-run co-movement between the growth of money supply and stock prices in India but the result of vector error correction model (VECM) does not exhibit any significant relationship in short run. Further, the error correction term of the VECM reveals a long-run unidirectional causality from money supply to stock prices. However, the Granger causality test confirms that the growth rate of money supply does not cause the stock market movement in India in short run. Finally, the variance decomposition analysis reveals that both the Indian stock markets are strongly exogenous in the sense that shocks to money supply explain only a small portion of the forecast variance error of the market indices. Again, the impulse response function analysis indicates that a positive shock in money supply has a small but persistently positive effect on stock prices in India.

scholarly journals The Integration of Conventional Equity Indices with Environmental, Social, and Governance Indices: Evidence from Emerging Economies

2021 ◽  
Vol 13 (2) ◽  
pp. 676
Author(s):  
Ramiz ur Rehman ◽  
Muhammad Zain ul Abidin ◽  
Rizwan Ali ◽  
Safwan Mohd Nor ◽  
Muhammad Akram Naseem ◽  
...  
Keyword(s):  
South Africa ◽  
Function Analysis ◽  
Impulse Response Function ◽  
Decomposition Analysis ◽  
Individual Country ◽  
Brics Countries ◽  
Long Run ◽  
Integration Test ◽  
Short Run ◽  
Equity Indices

This study investigates the integration of environmental, social, and governance (ESG) equity indices with conventional indices in Brazil, Russia, India, China, and South Africa (BRICS) individually and across all BRICS countries to better understand regional economic cooperation. Accordingly, we look at daily returns from 13 July 2013 to 28 February 2018 for the Morgan Stanley Capital International (MSCI) ESG indices and MSCI composite indices of the respective countries. To analyze the integration between the ESG equity indices of the sampled countries with their regional and across regional conventional counterparts, the Johansen Co-integration test is employed in this study. Further, the vector error correction model (VECM) is applied to test the causality between the sampled time-series. The impulse response function analysis further explains the impulse responses of each country’s MSCI ESG returns to one standard deviation of innovations to MSCI composite returns of the same country and across countries. Finally, the extent of the MSCI composite returns’ impact on the MSCI ESG returns in the same country indices, and cross-regional indices is examined with variance decomposition analysis. The results suggest that all ESG equity indices are integrated with conventional indices in all BRICS countries. Furthermore, there is a short-or long-run causality between MSCI ESG and MSCI composite equity indices of China and South Africa. Moreover, the study finds only short-run causality between conventional and non-conventional equity indices of Brazil and Russia, whereas we find only long-run causality between India’s non-conventional and conventional equity indices. Finally, the study finds that the all-individual country MSCI ESG equity indices shows a long-run causality with MSCI composite equity indices of all other BRICS countries. The findings also confirm the economic and financial cooperation between the BRICS countries.

Intensity of shock transmission amid US-BRICS markets

2015 ◽  
Vol 10 (3) ◽  
pp. 311-328 ◽  
Author(s):  
P. Lakshmi ◽  
S. Visalakshmi ◽  
Kavitha Shanmugam
Keyword(s):  
Stock Market ◽  
Granger Causality ◽  
Stock Markets ◽  
Subprime Mortgage ◽  
Content Type ◽  
Brics Countries ◽  
Long Run ◽  
The Us ◽  
The Usa ◽  
Short Run

Purpose – The purpose of this paper is to analyze the intensity of transmission of shocks from USA to BRICS countries in the long-run and short-run deviations and swiftness of recovery during US subprime mortgage crisis. This analysis enables the authors to explore the evolving patterns of relationships between these markets and examine whether their co-movements altered either in response to international shocks that originated in advanced markets like USA or due to their domestic fluctuations. Design/methodology/approach – Employing data of daily stock market indices (open and close) of BRICS countries for the period January 2, 2001 to May 31, 2012, this paper examines the interactions and characteristics of price movements of BRICS with US market by applying co-integration tests, vector error correction model and Granger causality relationship. The daily stock market indices data are derived from respective stock exchange web sites. Findings – The results exhibit that both long-run co-integration relationships and short-run Granger causality relationships exist between the stock markets of US-BRICS. Furthermore, this nexus is amplified in the short-run during 2007-2009, when the subprime mortgage financial crisis in the USA cropped up. This finding lends support to the prominence of developed (US) market links in the proliferation of persistent co-movements of BRICS stock markets. Research limitations/implications – The findings imply an increasing degree of global market integration due to quick dissemination of global shocks originating from developed market like USA, and swift recovery which can be attributed to the increased resilience, consistent with the moderated level of domestically driven risk in the BRICS markets. In spite of their similarities, long-run and short-run interdependences with the US stock market exhibit differences among the BRICS. This can be attributed to the regional heterogeneity in long-run risk and return co-movements with the USA. Practical implications – Changes from the US index easily affect these stock markets in the short-run, which implies that the US index may act as a leading indicator for investing funds in BRICS markets. Originality/value – This study would enable the authors to understand whether BRICS economies actually remain resilient to adverse developments in USA and could serve as alternative investment destinations for global portfolio diversification.

scholarly journals Transmission Mechanism of Exchange Rate Pass-Through to Domestic Price: The Case of Afghanistan

2020 ◽  
Vol 16 (4) ◽  
pp. 1
Author(s):  
Ajmal Arian ◽  
Arabi U.
Keyword(s):  
Exchange Rate ◽  
Impulse Response Function ◽  
Import Price ◽  
Variance Decomposition ◽  
Long Run ◽  
Effective Exchange ◽  
Short Run ◽  
Pass Through ◽  
Exchange Rate Pass Through ◽  
Effective Exchange Rate

This article investigates the mechanism of exchange rate pass-through to the prices in the context of the Islamic Republic of Afghanistan’s economy. This study explored the magnitude and speed of the pass-through effect on the prices by analyzing quarterly data from 2003 Q1 to 2019 Q2 considering five variables (viz., world food price index, foreign reserves, money supply, import price, and nominal effective exchange rate) based on the Vector Autoregression Model (VAR) with the cointegration and innovation accounting tools such has impulse response function and variance decomposition. The findings of the study suggest that the exchange rate pass-through in Afghanistan is incomplete. The import price is highly responsive in the short-run and moderately responsive an increasingly smooth movement in the long-run. However, CPI in the short-run with swift positive respond but the long-run smooth increasing movement. Furthermore, variance decomposition evidence shows that import price is affected by FR, NEER, CPI, and MS in both short-run and long-run, but the CPI strongly lagged by its variance, WFP, NEER, import price, and MS.

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