Open AccessThe Role of Sri Lankan Stock Market in the Asian Region
Author(s) -
Duminda Kuruppuarachchi
Publication year - 2016
Publication title -
vidyodaya journal of management
Language(s) - English
Resource type - Journals
ISSN - 2448-9352
DOI - 10.31357/vjm.v2i1.3648
Subject(s) - stock market , granger causality , cointegration , stock (firearms) , stock market bubble , china , business , economics , financial economics , geography , econometrics , context (archaeology) , archaeology
This paper investigates the interaction of the Sri Lankan stock market with other Asian stock markets in terms of cointegration, contemporaneous correlations, information spillovers, and impulse responses. The study consider India, China, Pakistan, Singapore, Malaysia, Hong Kong, Korea, and Japan as neighboring stock markets to the Sri Lankan market. And it use daily data of leading stock indices for each country from 01st January 2000 to 31st December 2012. Findings reveal that the Sri Lankan stock market is cointegrated with the Korean stock market but not with others. Contemporaneous correlations are significant between Sri Lanka and other Asian countries such as India, Singapore, Malaysia, Hong Kong, Korea, and Japan. Pakistan, Malaysian, and Korean stock markets Granger cause in mean to the Sri Lankan stock market while India and Korea Granger cause in variance. Extreme downside risks in Chinese stock market also Granger causes the Sri Lankan stock market. Impulse response analysis provides evidence for the following day’s impact on the Sri Lankan stock market due a current shock on other Asian stock markets. Findings of this paper provide insightful information to both policy makers and investors in order to understand the behavior of Sri Lankan stock market.KeywordsAsian Stock Markets, Granger Causality, Impulse Response, InformationSpillover, Sri Lankan Stock Market, Stock Market Interactions