Analysing stock market integration in top five global economies

The primary objective of the research is to determine the linkages between stock markets and to assess the potential for diversiation among the selected stock markets of the top ve global economies at present.

The daily closing prices of the ve stock indices for the period January 1, 2011 to October 31, 2023 are analysed in the present study using Granger causality Test, Johansen co-integration test, Vector Auto Regression Model to examine the relationships among the stock markets of the top ve global economies.

There is no cointegration, as demonstrated by the results of the Johansen cointegration test, which suggests that these markets do not have any long-term equilibrium linkages. This implies a lack of long-term, consistent mutual effect. On the other hand, Granger causality analysis, reveals the existence of transient causal connections between particular market pairs. These short-term causal linkages show direct effects and directional relationships over short periods of time.

By focusing on the stock markets of the top ve global economies (USA, China, Japan, Germany, and India), the study seeks to ll a signiant knowledge gap by assisting investors, policy makers, and researchers navigate the complexities of the modern, interconnected global nancial system. The study emphasizes how crucial it is to take into account both long-term equilibrium and short-term causal dynamics when exploring the associations among these signiant stock markets.