Are the Major South Asian Equity Markets Co-Integrated?

Abstract

Seemingly unrelated variables are quite often having relations with each other and this peculiar relation has always won the intentional and unintentional attention of many scientists and researchers. This paper is an attempt to investigate and interrogate the co-movements or the relations among the seemingly unrelated stock markets of South Asian countries, which includes Karachi Stock Exchange (Pakistan), Bombay Stock Exchange (India), Dhaka Stock Exchange (Bangladesh) and Nepal Stock Exchange (Nepal). The daily co-movement of the four well-known Indices comprising of KSE-100, BSE Sensex, DSE Composite Index, and NSE Index is examined by using the Johansen co-integration analysis for the period of May-1995 to May-2011. We found the linkage of stock prices of Karachi Stock Exchange with the stock prices of Dhaka stock exchange, while KSE is not co-integrated with the rest of outlined equity markets in terms of stock price indices.