Stock Market Integration Between Developed and Emerging Markets: Evidence from the EURO STOXX 50 and NIFTY 50
Article Sidebar
Main Article Content
Abstract
In today’s era, every country is aligning itself with a regional bloc to increase its trade. India, with 1.4 billion people, offers a lucrative market for other countries. Everyone wants to make trade ties with India. Recently, in January 2026, a mother of all trade deals wassigned between India and the EU. In light of all these developments, this paper sought to explore the interlinkages between the Indian and EU stock markets. Here, we tried to identify the interlinkages in front of the return generated by these two blocs of the stock market over the period. The present study examines the interdependence between the NIFTY 50 and the EURO STOXX 50 using daily data from January 2000 to December 2025. To ascertain the basic characteristics of the data, descriptive statistics and graphical analysis have been conducted. These tests serve as a torchlight for further analysis. The study employs the Augmented Dickey–Fuller and Phillips–Perron unit root tests to check the stationarity of the data. The unit root tests reveal that the logarithmic price series for both indices are nonstationary in level but stationary after dif erencing, indicating that the variables are integrated of order one. This is completely in line with the descriptive statistics and graphical analysis. Johansen cointegration analysis and Granger causality testing is performed to understand the long-run and short-run behaviour of the two indices. The Johansen cointegration test found that the two markets do not move together. At the same time, Granger causality indicated unidirectional causality from India to the EU. We found that only the EU has a significant influence on the Indian stock market.
Downloads
Article Details
This work is licensed under a Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International License.
How to Cite
References
N. Seth, A.K. Sharma, International stock market efficiency and integration, Journal of Advances in Management Research 12 (2015) 88–106. DOI: https://doi.org/10.1108/JAMR-07-2011-0010.
G.M. Caporale, L.A. Gil‐Alana, J.C. Orlando, Linkages Between the US and European Stock Markets: A Fractional Cointegration Approach, International Journal of Finance & Economics 21 (2016) 143–153. DOI: https://doi.org/10.1002/ijfe.1537.
B.H. Solnik, An equilibrium model of the international capital market, J. Econ. Theory 8 (1974) 500–524.
DOI: https://doi.org/10.1016/0022-0531(74)90024-6.
K. Kasa, Common stochastic trends in international stock markets, J. Monet. Econ. 29 (1992) 95–124.
DOI: https://doi.org/10.1016/0304-3932(92)90025-W.
G. Bekaert, C.R. Harvey, Foreign Speculators and Emerging Equity Markets, J. Finance 55 (2000) 565–613.
DOI: https://doi.org/10.1111/0022-1082.00220.
L. Baele, Volatility Spillover Effects in European Equity Markets, Journal of Financial and Quantitative Analysis 40 (2005) 373–401.
DOI: https://doi.org/10.1017/S0022109000002350.
M. Youssef, K. Mokni, A.N. Ajmi, Dynamic connectedness between stock markets in the presence of the COVID-19 pandemic: does economic policy uncertainty matter?, Financial Innovation 7 (2021) 13.
DOI: https://doi.org/10.1186/s40854-021-00227-3.
P. Vatsa, H. Basnet, F. Mixon, Stock market co-movement in Latin America and the US: evidence from a new approach, Journal of Financial Economic Policy 14 (2022) 162–171. DOI: https://doi.org/10.1108/JFEP-02-2021-0047.
H. Goel, P. Bajaj, M. Agarwal, A. AlKhawaja, S. Dsouza, Dynamic Volatility Spillovers Among G20 Economies During the Global Crisis Periods—A TVP VAR Analysis, Econometrics 13 (2025) 45. DOI: https://doi.org/10.3390/econometrics13040045.
F. Longin, B. Solnik, Extreme Correlation of International Equity Markets, J. Finance 56 (2001) 649–676.
DOI: https://doi.org/10.1111/0022-1082.00340.
K.J. Forbes, R. Rigobon, No Contagion, Only Interdependence: Measuring Stock Market Comovements, J. Finance 57 (2002) 2223–2261. http://www.jstor.org/stable/3094510.
F.X. Diebold, K. Yilmaz, On the past, present, and future of the Diebold–Yilmaz approach to dynamic network connectedness, J. Econom. 234 (2023) 115–120. DOI: https://doi.org/10.1016/j.jeconom.2023.01.021.
M. Raddant, D.Y. Kenett, Interconnectedness in the global financial market, J. Int. Money Finance 110 (2021) 102280.
DOI: https://doi.org/10.1016/j.jimonfin.2020.102280.
Z. Umar, O. Polat, S.-Y. Choi, T. Teplova, The impact of the Russia-Ukraine conflict on the connectedness of financial markets, Financ. Res. Lett. 48 (2022) 102976. DOI: https://doi.org/10.1016/j.frl.2022.102976.
B. Zhang, X. Li, H. Yu, Has the recent financial crisis changed the correlations between BRICS and developed stock markets? The North American Journal of Economics and Finance 26 (2013) 725–738. DOI: https://doi.org/10.1016/j.najef.2013.05.003
W. Zhang, X. Zhuang, D. Wu, Spatial connectedness of volatility spillovers in G20 stock markets: Based on block models analysis, Financ. Res. Lett. 34 (2020) 101274. DOI: https://doi.org/10.1016/j.frl.2019.08.022.
K. Kotha, C. Mukhopadhyay, Volatility Spillovers from the US to Indian Stock Market: A Comparison of GARCH Models, The IUP Journal of Financial Economics V (2007) 7–30. https://www.researchgate.net/publication/5105476
S.L. Ong, Chong Mun Ho, Testing for linear and non-linear Granger non-causality hypothesis between stock and bond: The cases of Malaysia and Singapore, The Singapore Economic Review 59 (2014) 1450045. DOI: https://doi.org/10.1142/S0217590814500453.
G. Sarwar, W. Khan, The Effect of US Stock Market Uncertainty on Emerging Market Returns, Emerging Markets Finance and Trade 53 (2016). https://doi.org/10.1080/1540496X.2016.1180592.
Md.S. Rahman, F. Shahari, Does the financial cooperation agreement increase the interdependency among ASEAN+3 equity markets? A Markov switching approach, International Economics and Economic Policy 18 (2021) 869–899. DOI: https://doi.org/10.1007/s10368-021-00499-1.
V. Victor, D. K K, M. Bhaskar, F. Naz, Investigating the Dynamic Interlinkages between Exchange Rates and the NSE NIFTY Index, Journal of Risk and Financial Management 14 (2021) 20. DOI: https://doi.org/10.3390/jrfm14010020.
R.K. Singh, Y. Singh, S. Kumar, A. Kumar, W.S. Alruwaili, Mapping Risk–Return Linkages and Volatility Spillover in BRICS Stock Markets through the Lens of Linear and Non-Linear GARCH Models, Journal of Risk and Financial Management 17 (2024) 437.
DOI: https://doi.org/10.3390/jrfm17100437.
A.K. Panda, S. Nanda, Market linkages and conditional correlation between the stock markets of South and Central America, Journal of Financial Economic Policy 9 (2017) 174–197. DOI: https://doi.org/10.1108/JFEP-08-2016-0063.
J. Trivedi, C. Spulbar, R. Birau, A. Mehdiabadi, Modelling Volatility Spillovers, Cross-Market Correlation And Co-Movements Between Stock Markets in The European Union: An Empirical Case Study, Business, Management and Economics Engineering 19 (2021) 70–90.