Journal Press India^®

Author Details ( * ) denotes Corresponding author

Purpose: The current study is an attempt to analyze the financial integration between NSE and NYSE stock market on the basis of daily closing index of NYSE and NSE. A saying goes like, ‘when America sneezes, world catches cold’. Therefore, we tried to testify that to what extent this statement is applicable in respect of Indian stock exchange market and further study inter linkages and inter relationships between them.

Design/Methodology/Approach: For the purpose of this study, New York Stock Exchange (NYSE) has been considered as America’s representative exchange and in respect to India, the National Stock Exchange (NSE) has been selected. The monthly closing stock index price has been taken starting from January, 2000 to December, 2016. The data were mainly collected from NYSE and NSE website. The Descriptive Statistic has been applied to study the normal trend and pattern. For checking data series stationarity, the line graph and the log value of indices have been used and further, to testify the data Augmented Dickey-Fuller (ADF) test under unit root hypothesis has been applied. Also, Granger Causality was applied for causation and for long-term relationship, Johansen Co-integration test was used. E-Views 9 was used for the analysis.

Findings: Descriptive statistics show that stock market of India provides lower returns in comparison to the New York stock market. Results inferred by Granger Causality test show that returns at NYSE does granger cause the returns at Indian stock exchange which also depicts that the returns on NSE is influenced more with NYSE index co-movements but not vice-versa because NSE does not Granger Cause return at NYSE. The result of the Johansen Co-integration test suggest the existence of cointegration between them which means that movements in NYSE index influences NSE market and both having co-movements.

Research Limitations/Implications: We took the sample data for the period January, 2000 to December, 2016. A larger sample data could also be taken in the future and although only one stock market index from both the countries were taken but one more major stock exchange could also be taken for the same study like Bombay Stock Exchange (BSE) and National Stock Exchange (NSE) and New York Stock Exchange (NYSE), National Association of Securities Dealers Automated Quotations (NASDAQ).

Practical Implications: The study provides the basis for framing government policy keeping in mind the existence of empirically proven financial integration between NSE and NYSE. Not only this, various market participants may use the conclusion of this study in order to formulate different investment strategy especially keeping in mind the fluctuations happening in Indian and American market.

Originality/Value: The study is unique, unpublished, and original.

Keywords

India-New York Inter-relationship, Stock Market, Integration, Granger Causality.

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