In this paper, we examine the dynamic nature of equity market integration for the South Asian countries. The daily data for local equity indices are used from 6 January 2004 to 31 March 2015. Copula GARCH models and Diebold and Yilmaz methodology have been employed to study the inter-temporal process of equity market integration. Empirical results show that the sample countries of the region exhibit very little or no levels of integration between them. Equity portfolio flows within the South Asian region reconfirms this trend for low integration in the region. Further, trend analysis of the fundamental determinants of financial integration for the SAARC countries was performed and the same was compared with its neighbouring regional economic bloc in Asia i.e. ASEAN + 6. It indicated that SAARC countries have to show sincere political commitment and require collaboration in efforts of policy realignment to work on their governance parameters, improve on their trade linkages and trade tariffs and develop their equity market infrastructure to achieve higher levels of financial integration. The paper contributes to the International Finance literature, especially dealing with regional economic blocs and has important implications for policy-makers, portfolio managers and academia.
In this paper, we examine the dynamic nature of equity market integration for the South Asian countries. The daily data for local equity indices is used from 6 January 2004 to 31st March 2015. Copula GARCH models have been employed to study the inter-temporal process of equity market integration. Empirical results show that the sample countries of the region exhibit very little or no levels of integration between them. Equity portfolio flows within the South Asian region reconfirm the findings based on price data that regional integration is strengthening over time. Further, trend analysis of the fundamental determinants of financial integration for the SAARC member states indicated that these countries have to work on their governance parameters, improve on their trade linkages and trade tariffs and develop their equity market infrastructure to achieve higher levels of financial integration as is observed by its neighbouring ASEAN+6 group members. The paper contributes to the International Finance literature, especially dealing with regional economic blocs by suggesting that South Asian member countries require collaboration in efforts of policy realignment and above all political commitment to make their alliance viable enough to enhance equity market integration
In this paper, we examine the dynamic nature of equity market integration for the South Asian countries. The daily data for local equity indices is used from 6 January 2004 to 31st March 2015. Copula GARCH models have been employed to study the inter-temporal process of equity market integration. Empirical results show that the sample countries of the region exhibit very little or no levels of integration between them. Equity portfolio flows within the South Asian region reconfirm the findings based on price data that regional integration is strengthening over time. Further, trend analysis of the fundamental determinants of financial integration for the SAARC member states indicated that these countries have to work on their governance parameters, improve on their trade linkages and trade tariffs and develop their equity market infrastructure to achieve higher levels of financial integration as is observed by its neighbouring ASEAN+6 group members. The paper contributes to the International Finance literature, especially dealing with regional economic blocs by suggesting that South Asian member countries require collaboration in efforts of policy realignment and above all political commitment to make their alliance viable enough to enhance equity market integration
Purpose – The purpose of this paper is to examine the price discovery and volatility spillovers in spot and futures prices of four currencies (namely, USD/INR, EURO/INR, GBP/INR and JPY/INR) and between futures prices of both stock exchanges namely, Multi-Commodity Stock Exchange (MCX-SX) and National Stock Exchange (NSE) in India.
Design/methodology/approach – The study applies cointegration test of Johansen's along with VECM to investigate the price discovery. GARCH-BEKK model is used to examine the volatility spillover between spot and futures and between futures prices. The other two models namely, constant conditional correlation and dynamic conditional correlation are used to demonstrate the constant and time-varying correlations. In order to confirm the volatility spillover results, the study also applies test of directional spillovers suggested by Diebold and Yilmaz (2009, 2012).
Findings – The results of the study show that there is long-term equilibrium relationship between spot and futures and between futures markets. Between futures and spot prices, futures price appears to lead the spot price in the short-run. Volatility spillover results indicate that the movement of volatility spillover takes place from futures to spot in the short-run while spot to futures found in the long-run. However, the results of between futures markets exhibit the dominance of MCX-SX over NSE in terms of volatility spillovers. By and large, the findings of the study indicate the important role of futures market in price discovery as well as volatility spillovers in India's currency market.
Practical implications – The results highlight the role of futures market in the information transmission process as it appears to assimilate new information quicker than spot market. Hence, policymakers in emerging markets such as India should focus on the development of necessary institutional and fiscal architecture, as well as regulatory reforms, so that the currency market trading platforms can achieve greater liquidity and efficiency.
Originality/value – Due to recent development of currency futures market, there is dearth of literature on this subject. With the apparent importance of currency market in recent time, this study attempts to study the efficient behavior of currency market by way of examining the price discovery and volatility spillovers between spot and futures and between futures prices of four currencies traded on two platforms. The study has strong implications for India's stock market especially at the time when its currency is under great strain owing to the adverse impact of global financial crisis.
Cet article analyse la relation empirique entre les transferts de fonds et la croissance économique dans les pays en transition se situant au sein de l'ancien bloc soviétique. Il cherche également à mesurer si l'effet des transferts de fonds est plus efficace dans les pays où la stabilité politique est plus présente, en utilisant la méthode des moindres carrés généralisés pour des données de panel, afin de contrôler l'hétéroscédasticité et la corrélation sérielle. Les résultats montrent principalement que les transferts de fonds ont un impact négatif sur la croissance et que ce dernier dépend de la stabilité politique des pays concernés. This paper examines the empirical relationship between remittances and economic growth in post-Soviet states, and the role that political stability plays in this context. Using Feasible Generalized Least Squares to tackle group heteroskedasticity and serial correlation in panels, we find that remittances have a significant negative correlation with the receiving countries' economic progress. Besides, this relationship is contingent upon the political stability the country enjoys.
Cet article analyse la relation empirique entre les transferts de fonds et la croissance économique dans les pays en transition se situant au sein de l'ancien bloc soviétique. Il cherche également à mesurer si l'effet des transferts de fonds est plus efficace dans les pays où la stabilité politique est plus présente, en utilisant la méthode des moindres carrés généralisés pour des données de panel, afin de contrôler l'hétéroscédasticité et la corrélation sérielle. Les résultats montrent principalement que les transferts de fonds ont un impact négatif sur la croissance et que ce dernier dépend de la stabilité politique des pays concernés. This paper examines the empirical relationship between remittances and economic growth in post-Soviet states, and the role that political stability plays in this context. Using Feasible Generalized Least Squares to tackle group heteroskedasticity and serial correlation in panels, we find that remittances have a significant negative correlation with the receiving countries' economic progress. Besides, this relationship is contingent upon the political stability the country enjoys.
