Co integration of American Stock Market with leading Asian Stock Markets of Pakistan, Bangladesh and India

Abstract

Among the worries associated with stock exchange traders is actually the financial markets run effectively, individually along with audio basic principles. Now a day’s stock exchange relationship is a hot issue throughout the world. In past we saw that people never took interest in the stock market. Instead of stock market they choose other businesses and means for profit maximization. The main purpose of this research is to find out whether Pakistan stock exchange (KSE), Bangladesh stock exchange (DSE) and Indian stock exchange (NSE) have any relationship with the American stock exchange (NASDAQ) which is the leading and most reputed stock exchange of the world. For finding the relationship or co integration between the above mentioned stock markets we are using Engle Granger test. Five year data is collected of the above mentioned stock exchanges from January 2009 to December 2013. Data has been collected on daily basis. Closing prices of the above mentioned are collected from their official websites on daily basis. If the unit root exists then it means the data is not stationary and if the data is not stationary it means that there is no relationship among the stock exchanges. By applying the test we got the result from which it is clear that there is no co integration among any of them. In all the three pairs of stock exchange which are NSE—NASDAQ, DSE—NASDAQ and KSE—NASDAQ the unit root exist which refer to that the data is not stationary. So it is clear that there is no co integration between any of them. All of the above discussed stock exchanges are not co integrated with each other. Pakistan stock exchange, Bangladesh stock exchange and Indian stock exchanges are the top and leading stock exchanges of the Asian stock market. If according to the there is no relationship or co integration in any of the mentioned stock exchanges we can say that as these three stock markets epresent the Asian market. So it can be said that there is also “no relationship among Asian and the American stock exchanges”.