An Empirical Investigation of Causality and Dynamic Linkages: A Case of Indian and American Equity Markets

Prajnan, Vol. 33, No. 3 October-December 2004

Posted: 31 Oct 2010

See all articles by Khan Masood Ahmad

Khan Masood Ahmad

affiliation not provided to SSRN

Shahid Ashraf

Jamia Millia Islamia (A Central University)

Shahid Ahmed

Jamia Millia Islamia (A Central University) - Economics

Date Written: 2004

Abstract

This paper attempts to detect the causal relationship and dynamic linkages between the NASDAQ Composite Index in US and the NSE Nifty in India during the period of 1999 to 2004 using intra-daily data. The study carries out a comprehensive analysis using Granger causality, cross correlation and the application of ARCH and VAR to examine the co- movement and volatility transmission between Indian and US markets. The main findings of the study are as follows : the Granger causality results indicate unidirectional causality running from US to Indian market, however, the causal relationship is stronger during 1999 to 2001 and weakens in the period 2002- 2004. The cross-correlation results substantiate the Granger causality test. The ARCH model gives evidence of volatility clustering in each series. The VAR analysis shows the spillover of volatility from NASDAQ to Nifty being significant during 1999 to 2001 while it is not so for the 2002-2004 period.

Suggested Citation

Ahmad, Khan Masood and Ashraf, Shahid and Ahmed, Shahid, An Empirical Investigation of Causality and Dynamic Linkages: A Case of Indian and American Equity Markets (2004). Prajnan, Vol. 33, No. 3 October-December 2004. Available at SSRN: https://ssrn.com/abstract=1700409

Khan Masood Ahmad

affiliation not provided to SSRN ( email )

Shahid Ashraf

Jamia Millia Islamia (A Central University) ( email )

Jamia Nagar, New Delhi
Delhi, Delhi 110025
India

Shahid Ahmed (Contact Author)

Jamia Millia Islamia (A Central University) - Economics ( email )

Jamia Nagar
New Delhi, 110025
India

HOME PAGE: http://jmi.ac.in/economics/faculty-members/Prof_Shahid_Ahmed-1783

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