International Financial Markets Integration or Segmentation: A Case Study of Equity Markets

Over the past 15 years, financial markets have become increasingly global. The relationship among the equity markets of the developed and the emerging countries has been examined extensively in the literature. This paper studies the interdependence among the major stock markets of the world. Using the monthly data from January 1993 to September 2003, we examine the stock market indices of India (Sensex), Hong Kong (Hang Seng), the USA (DJIA) and the UK (FTSE-100). Co-integration technique has been employed to study the long-term linkages among the markets. We found that the equity markets of India and Hong Kong are co-integrated with the other markets whereas the markets of the USA and UK are not.