1Guest Faculty of Commerce, Department of Evening Studies - Multi Disciplinary Research Center, Panjab University, Chandigarh
2Junior Research Fellow, University Business School, Panjab University, Chandigarh
Online Published on 24 June, 2022.
The spread of COVID-19 has a dramatic impact on financial markets across all over the world. It has created an unprecedented level of risk, resultant in short term losses to investors during this period. Therefore, this paper is an attempt to investigate the international economic linkages between the Indian stock market and stock markets of selected countries during the pandemic period.
The objectives of the study have been completed with the help of daily closing index data collected for the period of 1stFebruary, 2020 to 31st March, 2021. The selected countries namely U.S.A, China, Japan, Germany and India are the top five GDP holder countries according to the IMF world economic outlook report of2020. The results were further analyzed with the help of Johansen co-integration test, Vector error correction method, granger causality test, variance decomposition and impulse response test.
The results of the study indicates that the Indian stock market is co-integrated with other developed countries’ stock markets in the long run, and there exists a significant unidirectional relationship with stock indices of USA, Japan and Germany. The results suggests that still there is scope for portfolio diversification for investors in other countries.
The study offers unique insights into the economic interconnections of the top five GDP-holder countries throughout the pandemic period, as well as implications for portfolio diversification for investors in other countries.
International Economic Linkages, Covid 19, Investment decision, Stock market integration
