Does Economic Integration Affect the Co-movement between Financial Markets? Evidence from Pakistani equity market with its global partners
Main Article Content
Abstract
The study investigates the impact of bilateral trade, economic fundamentals and financial crisis on the equity market integration (EMI) of Pakistan’s equity market with its major global trading partners (China, India, USA and UK) for the period 1998 to 2016. The findings of the study indicate that bilateral trade and economic conditions have a significant impact on EMI, the export dependence of two economies may increase the EMI and import dependence reduces the EMI of two economies. Moreover, inflation differential and volatility in the bilateral exchange rate have a negative impact on EMI. It implies that inflation rates in Pakistan’s equity market are higher as compare to other markets and volatility in bilateral exchange rate may reduce trade flows and its tendency to follow other market (Bracker, Docking , & Koch, 1999). Furthermore, the financial crisis in an economy may reduce the EMI with its trading partners and EMI between different markets is affected by their bilateral economic fundamentals. The results imply that financial integration between different markets is affected by their bilateral economic fundamentals. The study has strong implications for international investors who need to assess risks and benefits associated with international portfolio diversification.
Downloads
Metrics
Article Details
This work is licensed under a Creative Commons Attribution 4.0 International License.
Authors who publish with this journal agree to the following terms:
- The author(s) retain the copyright on work published in the Journal of Applied Economics and Business Studies and grant the journal right of first publication.
- Individual articles are published Open Access under the Creative Commons Attribution 4.0 International License , which permits unrestricted use, distribution, and reproduction on any medium, provided the original author (s) and source are properly credited.