Investigating the impact of global market trends and market interaction on the Indian stock market through statistical time series modeling

Abstract

In today’s age, Stock Market is considered to be one of the most thrilling and challenging financial activities. Due to globalization, it can easily be said that the fluctuations seen in the stock market are the result of the flow of information. In order to get this information, one way is to get the stock prices of another market across the globe. With the advancement in global trades and interdependency of various markets, it can easily be concluded that there would be a great degree of interrelation between the national market and the global. This understanding of inter relation between national and global markets plays an important role in pricing, forecasting, and equivocation activities. In order to predict the Indian market the information is gathered overnight in other stock markets such as NYSE (New York Stock Exchange), LSE (London Stock Exchange), and All ordinates. (Australian all Ordinaries) can be taken into consideration. The opening value of the Indian market can be predicted considering the closing values of mentioned stock markets.

The proposed work empirically investigates how Indian National Stock Exchange (NSE) gets affected by other global stock markets. The proposed work does a comprehensive analysis in order to understand the co-movement and exchange of information from NYSE, LSE, and All Ordinates to the NSE. We found a strong correlation between these stock markets during our study period and we can easily conclude that using this correlation we can predict the value of NSE based on the index of other stock markets i.e. NYSE, LSE, and All ordinates.

Subject Classification:

• 62J05
• 62M10
• 97K40

Keywords:

• Regression
• Correlation
• Stock market index
• Standard deviation
• Descriptive statistics
• Forecasting