Variance Decomposition Analysis
The Variance decomposition is also used to see the short run dynamic relationship between Bharat and other selected stock markets. The variance decomposition analysis of the selected stock exchanges is presented by the tables from 7 to10. The following tables decompose the returns at the selected stock exchanges for a period ranging from 1 to 10:
Table 7: Variance Decomposition of Bharat Period S.E. Bharat H.K. CHINA U.S. 1 0.014078 100 0 0 0
2 0.014455 94.9745 0.037171 0.108475 4.879855
3 0.01451 94.2543 0.353383 0.109982 5.282333
4 0.014513 94.22422 0.366965 0.110384 5.298433
5 0.014513 94.2222 0.36766 0.110466 5.299677
6 0.014513 94.22213 0.367726 0.110474 5.299672
7 0.014513 94.22211 0.367729 0.110474 5.29969 …show more content…
The ADF test shows that all series are stationary at first difference. The results of granger causality test conclude the unidirectional causal relationship between Bharat and U.S. but there were found the bidirectional causal relationship between Bharat stock market and the stock market of Hong Kong and China. The result of Johansen’s cointegration test show no cointegrating vector at trace and maximum eigen value which indicate that there is no long run equilibrium relationship between Bharat stock market with other selected stock markets. The results of VAR show that Bharat stock market get influenced by US and Hong Kong and influence to Hong Kong and China. But variance decomposition showed that only stock market of US has some visible impact on Bharat stock market in short run. Impulse response also proves this result. Bharat stock market was not found integrated in long run with other selected markets and short run relationship is also not confirmed by all the models. So portfolio diversification benefits are available for international investors in different selected stock markets under the study in long run as well as in short
The Variance decomposition is also used to see the short run dynamic relationship between Bharat and other selected stock markets. The variance decomposition analysis of the selected stock exchanges is presented by the tables from 7 to10. The following tables decompose the returns at the selected stock exchanges for a period ranging from 1 to 10:
Table 7: Variance Decomposition of Bharat Period S.E. Bharat H.K. CHINA U.S. 1 0.014078 100 0 0 0
2 0.014455 94.9745 0.037171 0.108475 4.879855
3 0.01451 94.2543 0.353383 0.109982 5.282333
4 0.014513 94.22422 0.366965 0.110384 5.298433
5 0.014513 94.2222 0.36766 0.110466 5.299677
6 0.014513 94.22213 0.367726 0.110474 5.299672
7 0.014513 94.22211 0.367729 0.110474 5.29969 …show more content…
The ADF test shows that all series are stationary at first difference. The results of granger causality test conclude the unidirectional causal relationship between Bharat and U.S. but there were found the bidirectional causal relationship between Bharat stock market and the stock market of Hong Kong and China. The result of Johansen’s cointegration test show no cointegrating vector at trace and maximum eigen value which indicate that there is no long run equilibrium relationship between Bharat stock market with other selected stock markets. The results of VAR show that Bharat stock market get influenced by US and Hong Kong and influence to Hong Kong and China. But variance decomposition showed that only stock market of US has some visible impact on Bharat stock market in short run. Impulse response also proves this result. Bharat stock market was not found integrated in long run with other selected markets and short run relationship is also not confirmed by all the models. So portfolio diversification benefits are available for international investors in different selected stock markets under the study in long run as well as in short