International Journal For Multidisciplinary Research

E-ISSN: 2582-2160     Impact Factor: 9.24

A Widely Indexed Open Access Peer Reviewed Multidisciplinary Bi-monthly Scholarly International Journal

Call for Paper Volume 5 Issue 6 November-December 2023 Submit your research before last 3 days of December to publish your research paper in the issue of November-December.

Contagion Effect Between Bombay Stock Exchange (BSE), National Stock Exchange (NSE) and Nasdaq

Author(s) Mansha Rafiq
Country India
Abstract This comprehensive study investigates the contagion effect and relationships among three major stock exchanges—specifically, the two largest stock exchanges in India, BSE (Bombay Stock Exchange) and NSE (National Stock Exchange), and the globally renowned NASDAQ—spanning an extensive eight-year period on a daily basis. Employing a robust analytical framework in E-views, the study conducts a suite of tests, including Unit Root tests, Granger causality analysis, Johansen's Cointegration test, Vector Error Correction Models (VECM), and Dynamic Ordinary Least Squares (DOLS). The results of our investigation reveal a significant cointegration among BSE, NSE, and NASDAQ, indicating a long-term relationship between these stock exchanges. Notably, the study establishes that BSE Granger causes NSE, given their shared national context. Moreover, in an international context, NASDAQ emerges as a Granger cause for both BSE and NSE, while NSE Granger causes NASDAQ. This nuanced understanding of Granger causality relationships has profound implications for investors seeking to optimize their portfolios. Importantly, our findings suggest a viable strategy for portfolio diversification, emphasizing the potential benefits of allocating investments across stock exchanges with limited correlation. Specifically, investors can strategically diversify their portfolios by considering exchanges that do not exhibit Granger causality relationships with each other. This insight provides a practical guide for investors looking to capitalize on opportunities in markets with distinct and uncorrelated movements, thereby enhancing the effectiveness of international portfolio diversification. In essence, this study underscores the feasibility of diversification between exchanges with no observed Granger causality relationships, shedding light on the nuanced dynamics of inter-market dependencies. Investors can leverage these findings to make informed decisions, mitigating risks, and capitalizing on diverse opportunities across global financial markets.
Keywords Unit root test, Granger Causality, Johansons Cointegration, VECM, Dynamic OLS
Field Sociology > Banking / Finance
Published In Volume 5, Issue 6, November-December 2023
Published On 2023-11-16
Cite This Contagion Effect Between Bombay Stock Exchange (BSE), National Stock Exchange (NSE) and Nasdaq - Mansha Rafiq - IJFMR Volume 5, Issue 6, November-December 2023. DOI 10.36948/ijfmr.2023.v05i06.9004
Short DOI

Share this