Authors

1. Dr. Anju Arora

Affiliation

• Associate Professor, Department of Commerce, Keshav Mahavidyalaya, University of Delhi, Delhi Ms. Rewa Kamboj, CA

Abstract

An array of measures aimed at relaxation of the restrictions on international flow of capital markets
and trade have been taken in most of the developed and developing countries. The worldwide policy
changes and initiatives are expected to display a deep impact on the capital market indices such that
their movements must be in tandem. The study closely examines the extent of integration of capital
market indices across the major countries of the world.
Main findings: While S&P 500, Nasdaq, Dow Jones, Dax Index, BSE 30 and CAC 40 index have
shown strong positive co relationship among themselves, indices like Shanghai, TSXE and Nikkei
have displayed almost nonexistent coherency with other stock indices. Bovespa, Hang Seng, BSE
30 and DAX index seems to have a tangent influence on each other's stock prices. RTSI has
portrayed certain movements in tandem with Hang Seng and Bovespa but no relationship with other
indices. Thus, the study concluded safely that the markets do react to global cues and any happening
in the global scenario be it macroeconomic or country specific (foreign trade channel) affect the
various markets.
Policy Implications of Study: The study findings about the existence of inter-linkages among
international capital markets has serious implications on determining the extent of portfolio
diversification as well as macroeconomic policies changes that can be initiated at the national level
for different countries. The current study will aid in better international portfolio diversification and will
act as a tool for international price arbitrage. Further, study of level of correlation between Indian
stock market and other major stock markets, helps the investors from India in international arena to
comprehend easily the level of interdependence among the major stock markets in the world and its
impact on Indian stock market. The study findings may be gainfully employed by policy makers,
investors, business managers, etc. who need to know how far a global crisis can impact the regional
stock markets in the globally integrated environment.

Keywords

BSE Sensex, Capital Market Indices, Dow Jones, DAX Index, Globalisation, Nasdaq, S & P 500

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