Affiliations: [a] Visvesvaraya Technological University, REVA Business School REVA University Rukmini Knowledge Park, Kattigenahalli, Yelahanka, Bangalore, Karnataka, India | [b] Department of Business Administration, B.N.M. Institute of Technology, Bengaluru, India
Abstract: In a rapidly globalizing world, understanding the relationships between major stock markets is of paramount importance for investors and financial analysts. This study explores the interdependence and cointegration of stock markets in Japan, India, and the USA, and explores the dynamics of global financial markets as well as the survival of a long-term and short-term link between these three indices. These leading stock markets were selected because of the researchers’ desire to learn more about the connections between them. From April 2012 through March 2022, we used monthly data from three major stock market indices: the NIKKEI (Japan), theBSE SENSEX (India), and the NASDAQ (USA). Stock market performance in both the United States and India tend to move together. Additionally, the GC test is utilized in an effort to ascertain if the markets have any form of forecasting ability. Based on the results of the tests conducted, it was determined that the NASDAQ index can accurately predict the SENSEX index, but the NIKKEI index. The United States and the Indian stock markets are highly correlated. To further investigate the markets’ potential for foresight, the Granger causality test is applied. Tests showed that while the NASDAQ index predicted the SENSEX index with high precision, the NIKKEI index did not. After a causal relationship has been established, we then look for evidence of a short- and long-term connection.
