India and US stock indexes - A cointegration and granger-causality test

Gunjan Malhotra, Institute of Management Technology, Ghaziabad

Abstract: The paper empirically investigates the long-run equilibrium relationship between the US and Indian stock market indexes. The long-run relationship among the two markets is analyzed using econometric tools like unit root, Engle Granger residual based test of cointegration, and Granger causality test. The results show that there is a long-run relationship between the two stock markets. Indian stock markets like BSE and Nifty are highly influenced by NASDAQ. A partial influence of Indian stock markets on Dow Jones has also been found. The cointegration results show that business investor’s can make efficient long-run investment decisión in the Indian stock market.

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