A STUDY ON CO-INTEGRATION OF INDIAN STOCK MARKET

WITH WORLD STOCK MARKET

Dissertation Report submitted in partial fulfilment of the requirements for the
award of the degree of
MASTER OF BUSINESS ADMINISTRATION

Of

BENGALURU CENTRAL UNIVERSITY

By

MANIKANDAN.K

REG NO: MB187667

Under the guidance of

PROF. DILEEP

Professor

Rashtreeya Sikshana Samithi Trust

RV INSTITUTE OF MANAGEMENT
CA 17, 36TH cross, 26th main, 4th T Block,

Jayanagar, Bangalore-560041
 DECLARATION BY THE STUDENT

I hereby declare that project report titled “A Study On Co-Integration of Indian Stock Market With

World Stock Market.” is the result of the project work carried out by me under the guidance of

Prof.Dileep, Professor, RV Institute of Management, in partial fulfillment for the award of Master’s

Degree in Business Administration by Bangalore Central University.

I also declare that this project is the outcome of my own efforts and that it has not been submitted to

any other University or Institute for the award of any other degree or Diploma or Certificate.

Place: Bangalore Name: MANIKANDAN.K

Date: 10/08/2020 Register Number: MB187667

 RASHTREEYA SIKSHANA SAMITHI TRUST

R V INSTITUTE OF MANAGEMENT
CA 17, 26 Main, 36th Cross, 4th T Block, Jayanagar
Bengaluru, Karnataka 560 041

CERTIFICATE OF ORIGINALITY

Date: 01st August 2020

This is to certify that, the dissertation titled “A STUDY ON CO-INTEGRATION OF INDIAN

STOCK MARKET WITH WORLD STOCK MARKET” is an original work of

Mr.MANIKANDAN.K; bearing University Register Number MB187667 and is being submitted in

partial fulfillment for the award of the Master’s Degree in Business Administration of Bangalore

University. The report has not been submitted earlier either to this University/Institution for the

fulfillment of the requirement of a course of study. Student is guided by Prof. DILEEP who is the

Faculty Guide as per the regulations of Bangalore Central University. The institution also certifies

that, the dissertation work of the student has been periodically monitored and no plagiarism found in

his report.

PROF. DILEEP DR. PURUSHOTTAM BUNG

FACULTY GUIDE DIRECTOR
 ACKNOWLEDGMENT

I oblige and humble myself to thank all the people who have been associated with me and played
a key role towards the completion of this internship project work.

I express my sincere thanks to Dr. PURUSHOTTAM BUNG, Director, RV Institute of

Management for extending his support till the completion of the project work.

My deepest gratitude to my project guide Prof. DILEEP, Professor, RV Institute of Management

for her guidance in shaping my project.

Last but not the least, I would like to thank all the teaching and non-teaching staff of RV Institute of
Management, and my friends who have provided me with all the support and assistance required for
completing the study.

Place: Bangalore Name: MANIKANDAN.K

Date: 10/08/2020 Register Number: MB187624
 Abstract

This research was taken up with certain objectives while understanding and willingness to check the
Interdependence on the World Stock Market especially from the viewpoint of Indian Stock Market.
The historical secondary data of the various selected World Stock Indices were collected and then
was put to test using various Econometric Tools to extract the results. The statistical tools and tests
applied upon the gathered data have been improved the efficiency of the data. The tests are globally
accepted. It is also notable that the research has focused on the ‘ Cause and Effect’ Relationship
between the Selected Indices/Stock Market. If found out the inter dependence our research also
helps us by how much in terms of percentage is the dependence.

Our main yet important motive was to help the day traders to plan their day trades accordingly with
the results thus obtained from this detailed research.
 TABLE OF CONTENTS
CHAPTER PARTICULAR PAGE
NO.
INTRODUCTION
1.1 Origin of Stock Market 1
1.2 The History of Stock Exchanges in India 2
1.3 Regulatory Bodies 5
1.4 Instruments Traded in Stock Market 8
1.4.1 Shares/Stocks 8
CHAPTER-1 1.4.2 Indices 9
1.4.3 Derivatives 9
1.4.4 Bonds 10
1.5 Theoretical Background 10
1.6 Importance of the Topic 12
1.7 Road Ahead 12
LITERATURE REVIEW AND RESEARCH DESIGN
2 Literature Review 14
2.1 Statement of the Problem 22
2.2 Scope of the Study 22
2.3 Objective of the Study 23
CHAPTER 2 2.4 Hypothesis 23
2.5 Sampling Plan 23
2.6 Tools for Data Collection 23
2.7 Data Analysis 24
2.8 Limitations of the Study 24
PROFILE OF THE ORGANISATION
3.1 National Stock Exchange 25
3.2 Bombay Stock Exchange 27
3.3 New York Stock Exchange 28
3.4 Switzerland Stock Exchange 30
3.5 German Stock Exchange 31
CHAPTER 3 3.6 Netherlands Stock Exchange 32
3.7 Hong Kong Stock Exchange 35
3.8 Shanghai Stock Exchange 36
3.9 London Stock Exchange 37
3.10 Australian Stock Exchange 43
3.11 Tokyo Stock Exchange 44
3.12 Brazilian Stock Exchange 44
DATA ANALYSIS AND INTERPRETATION
4.1 Normality Test 49
4.2 Stationary Test 52
4.3 Auto Correlation Test or Serial Correlation 54
4.4 Heteroskedasticity Test 55
CHAPTER 4 4.5 Multi Collinearity Test 56
4.6 Multiple Regression Analysis 57
4.7 Correlation 61
4.8 Granger Causality Test 62
4.9 Average Risk Return 71
FINDING CONCLUSION AND SUGGESTION
5.1 Findings 74
CHAPTER 5 5.2 Suggestion 74
5.3 Conclusion 75
 Table of Tabular Representation

SL.No PARTICULARS PAGE

NO
3.12 Tabular Representation of World Stock Market (Based on 47
Capitalisation)
4.1.2 Descriptive Statistics 50
4.2.1 Unit Root Test 52
4.2.2 Stationary Test of Selected Variables at Level and 1st Level 53
Difference
4.3.1 Auto Correlation Test or Serial Correlation 54
4.4.1 Heteroskedasticity Test 55
4.5.1 Multi Collinearity Test 56
4.6.1 Multiple Regression Analysis (Excluding Switzerland, Germany 57
and London)
4.6.2 Multiple Regression Analysis (Excluding USA, Switzerland, 58
Germany and London)
4.6.3 Multiple Regression Analysis (Excluding USA, Germany and 59
Netherlands)
4.6.4 Multiple Regression Analysis (Excluding Netherlands and 60
London)
4.7.1 Correlation Matrix 61
4.8.1 VAR Model 62
4.8.2 Multiple Regression Analysis (Excluding Switzerland, Germany 63
and London)
4.8.3 Multiple Regression Analysis (Excluding USA, Switzerland, 64
Germany and London)
4.8.4 Multiple Regression Analysis (Excluding USA, Germany and 65
Netherlands)
4.8.5 Multiple Regression Analysis (Excluding Netherlands and 66
London)
4.8.6 Pairwise Granger Causality Test 67
4.9.1 Average Annual Return and Risk of Selected Indices 71
 Table of Graphs/Pictorial Representation

SLNO PARTICULARS PAGE

1.1. a Pictorial Representation of various Stock Markets chosen for the 2
study
1.2.1 Graphical Representation of World Stock Market (Based on 4
Capitalisation)
1.3. a Pictorial Representation of Regulatory Bodies 5
1.4. a Pictorial Representation of Instruments Traded in Stock Market 8

3.a Graphical Representation of Selected Stock Market 40

4.9.1 Graphical representation of Annual Average Return of the 71

Selected Indices.

4.9.2 Graphical representation of Risk and Co-variance. 72

 A STUDY ON CO-INTEGRATION OF INDIAN STOCK MARKET WITH THE WORLD
STOCK MARKET

CHAPTER 1
INTRODUCTION

1.0 Introduction
Stock is a term used to represent a financial specialist's possession in an organization. The
individuals who own stock are normally called investors or investors. As an investor, a speculator
hypothetically possesses a level of everything the organization claims or owes. The organization's
gainfulness, or deficiency in that department, decides if its stock is exchanged at a sequential cost.
While trading of debt and commodities has its origins in the Middle Ages, the modern concept of
a stock market began in the late 16th century.

1.1 Origin of stock market:

Stock markets were started when countries in the New World began trading with each other. While
many pioneer merchants wanted to start huge businesses, this required substantial amounts of
capital that no single merchant could raise alone. As a result, groups of investors pooled their
savings and became business partners and co-owners with individual shares in their businesses to
form joint-stock companies. Originated by the Dutch, joint-stock companies became a viable
business model for many struggling businesses. In 1602, the Dutch East India Co. issued the first
paper shares. These exchangeable medium allowed shareholders to conveniently buy, sell and
trade their stock with other shareholders and investors.

Beginnings of Wall Street:

To a great many people, the name Wall Street is equal with stock trade. The market on Wall Street
opened May 17, 1792 at the intersection of Wall Street and Broadway. Twenty-four flexibly
expedites consented to the Buttonwood Arrangement outside 68 Wall St. in New York, underneath
a buttonwood tree. On March 8, 1817 the gathering renamed itself the New York Stock and
Exchange Board and got off the road into 40 Wall St. The association that would characterize the
world's financial future was conceived.

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Impact:

Today, there are many stock trades around the world, each providing the capital important to help
industry development. Without these crucial assets, numerous progressive thoughts could never
turn into a reality, nor would central enhancements be made to existing items. Moreover, the
securities exchange makes individual riches and money related strength through private
speculation, permitting people to finance their retirement as well as different endeavours.

1.1.a : Pictorial Representation of various Stock Markets chosen for the study

1.2 The History of Stock Exchanges in India:

Security exchanging India returns to the eighteenth century when the East India Company started
exchanging advance protections. Corporate offers began being exchanged the 1830s in Bombay
(presently Mumbai) with the load of Bank and Cotton presses. The straightforward and casual
beginnings of stock trades in India return one to the 1850s when 22 stockbrokers started
exchanging inverse the Town Hall of Bombay under a banyan tree. The tree despite everything
remains in the zone which is currently known as Horniman Circle.

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The scene at that point moved to banyan trees at the Meadows Street intersection, which is
presently known as Mahatma Gandhi Road, after 10 years. The move kept occurring as the quantity
of specialists expanded, at long last settling in 1874 at what is known as Dalal Street. This so far
casual gathering known as the Native Share and Stockbrokers Association sorted out themselves
as the Bombay Stock Exchange (BSE) in 1875. The BSE is the most established stock trade in
Asia and was the first to be allowed changeless acknowledgment under the Securities Contract
Regulation Act, 1956.

The BSE was followed by the Ahmedabad Stock Exchange in 1894 which focused on trading in
shares of textile mills. The Calcutta Stock Exchange began operations in 1908 and began trading
shares of plantations and jute mills. The Madras Stock Exchange followed, being set up in 1920.

In the post-freedom time, the BSE overwhelmed the volume of exchanging. Be that as it may, the
low degree of straightforwardness and undependable clearing and settlement frameworks, aside
from other large-scale factors, expanded the need of a budgetary market controller, and the SEBI
was conceived in 1988 as a non-legal body. It was made a legal body in 1992.

After the Harshad Mehta trick in 1992, there was a squeezing requirement for another stock trade
sufficiently enormous to contend with the BSE and carry straightforwardness to the securities
exchange. This brought forth the National Stock Exchange (NSE). It was joined in 1992, become
perceived as a stock trade in 1993, and exchanging started on it in 1994. It was the principal stock
trade on which exchanging occurred electronically. Because of this opposition, BSE likewise
presented an electronic exchanging framework known as BSE On-line Trading (BOLT) in 1995.

The BSE propelled its affectability list, the Sensex, presently known as the S&P BSE Sensex, in
1986 with 1978–79 as the base year. This is a file of 30 organizations and is a benchmark stock
list, estimating the general execution of the trade. The record arrived at the degree of 1,000 in July
1990, 2,000 in January 1992, 4,000 in March 1992, 5,000 in October 1999, and 6,000 in February
2000. The trade presented value subsidiaries in 2000. List alternatives were propelled in June 2001,
investment opportunities in July 2001, and stock prospects in November 2001. India's sans first
buoy record, BSE Teck, was propelled in July 2001.

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Its rival, NSE, propelled its benchmark trade, the CNX Nifty, presently known as Nifty 50, in
1996. It contains 50 stocks and capacities as the exhibition proportion of the trade. As far as
electronic screen-based exchanging and subsidiaries, it beat BSE by propelling first of its sort
items and administrations.

BSE and NSE are not the only stock exchanges in India. After the country gained independence,
23 stock exchanges were added not including the BSE. However, at present, there are only seven
recognized stock exchanges. Apart from the BSE and NSE, they are:
• Calcutta Stock Exchange Ltd.
• Magadh Stock Exchange Ltd.
• Metropolitan Stock Exchange of India Ltd.
• India International Exchange (India INX)
• NSE IFSC Ltd.
All other exchanges have been granted exit by SEBI.

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1.2.1 Graphical Representation of World Stock Market (Based on Capitalisation)

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1.3 Regulatory Bodies:

1.3.a Pictorial Representation of Regulatory Bodies

Ministry
of
Finance

Regulatory
Law SEBI
Bodies

Reserve
Bank of
India

The Ministry of Finance (MoF), the Securities & Exchange Board of India (SEBI) and the Reserve
Bank of India (RBI) are the three regulatory authorities governing Indian capital market.

Ministry of Finance (MoF)

The Department of Economic affairs directly manages the Capital Markets segment under the
directions of MoF. This segment formulates the rules for the efficient growth of the Stock Market
which includes derivatives, debt, and equity. It also formulates regulations for safeguarding the
interest of the investors.

This segment regulates the Indian Capital Markets through the following laws:

• Depositories Act, 1996

• Securities Contract (Regulation) Act, 1956
• Securities and Exchange Board of India Act, 1992

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Reserve Bank of India (RBI)
The Reserve Bank of India Act, 1934 governs policies framed by the Reserve Bank of India. The
functions of RBI in this regard are as follows:

Implementation of Monetary and Credit policies

Issuance of Currency Notes
Government’s Banker
Banking System Regulator
Foreign Exchange through Foreign Exchange Management Act, 1999
Managing payment & settlement system
Apart from the above functions, RBI is also actively involved in developing the financial market.

Securities & Exchange Board of India (SEBI)

The Securities & Exchange Board of India (SEBI) Act, 1992 regulates the functioning of SEBI.
SEBI is the apex body governing the Indian stock exchanges.

The primary functions of SEBI are as follows:

Protective Functions

I. It checks Price rigging

II. Prohibits insider trading
III. prohibits fraudulent and Unfair Trade Practices

Development Functions

I. SEBI promotes training of intermediaries of the securities market.

II. SEBI tries to promote activities of stock exchange by adopting a flexible and adaptable
approach

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Regulatory Functions

I. SEBI has framed rules and regulations and a code of conduct to regulate the intermediaries such
as merchant bankers, brokers, underwriters, etc.
II. These intermediaries have been brought under the regulatory purview and private placement
has been made more restrictive.
III. SEBI registers and regulates the working of stock brokers, sub-brokers, share-transfer agents,
trustees, merchant bankers and all those who are associated with stock exchange in any manner
IV. SEBI registers and regulates the working of mutual funds etc.
V. SEBI regulates takeover of the companies
VI. SEBI conducts inquiries and audit of stock exchanges.

The participation in the Indian Stock Market of both the domestic or foreign financial
intermediaries are gov erned by the regulations framed by SEBI. Additionally, Foreign Portfolio
Investors (FPIs) can participate in Indian Stock Market after registering them with an authorized
Depository Participant.

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1.4: Instruments traded in Stock Market :

1.4.a Pictorial Representation of Instruments Traded in Stock Market

• Common stock
• Preference Stock • Capitalisation Index
• On basis of Market • Credit Adjusted Indices
Capitalisation • Fixed Income Indices
• Industry/Sector based • Sector Indices
• Defencive • Volatility Index
• Cyclical
• Value and Growth

Shares/Stock
s Indices

Bond Derivatives
• .) Treasury bonds;
• 2) Investment-grade corporate
bonds (high quality);
•Forwards
• 3) High-yield corporate bonds
(low quality),
•Future
• 4) Foreign bonds;
• 5) Mortgage-backed bonds;
•Options
and
• 6) Municipal bonds.
•Swaps

1.4.1: Shares/stocks

A stock is a fraction or part of ownership of the company. The stocks are usually held with the
companies that are publicly traded in the Stock market.
Different Type of stocks are:
• Common Stock- Stocks that are publicly traded in the stock market which determines the
ownership of the stock holder by the number of shares held.
• Preference stocks- Preferential stocks are those stocks which are guaranteed for a
preferential treatment for any matter relating to the company.

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• Stocks based on Market capitalisation- The stock market has been broadly classified into
three major categories such as Large cap, Mid cap and Small cap. The stocks are classified
and based under this umbrella based on their total market capitalisation.
• Industry and Sector related stocks- Any company that has been listed in the stock market
has to be a part of any sector or industry. Each sector has an Index and the companies
operating under such sector fall under such Sector related stocks.
• Defensive stock-Defensive stocks are such stocks which are hardly disturbed by the
external happenings of the world and the markets. In simpler terms defensive stocks are
those stocks which offer essentialities to people which they continue to buy no matter what.
• Cyclical Stocks- Every business has a cycle through which it has to pass irrespective of its
business model. There are other stocks of company which operate seasonally meaning the
business model is such that the business operates specifically only in a particular season.
• Growth and Value stocks: Growth stocks are those stocks that are for business that are
rapidly growing and expanding their business and avenues. While the value stocks are
those stocks that are undervalued over a long period of time but have tremendous potential.
In simpler terms it means stocks whose value is greater than the current market price such
stocks are called Value stocks.

1.4.2 Indices
Index is concurrent measure of a particular stock market that helps the investors to know the prices
of the underlying stocks and also this helps the investors to analyse the past performance in order
to predict the future.
There are different types of Indices some of them are;
• Capitalisation Index
• Credit Adjusted Indices
• Fixed Income Indices
• Sector Indices
• Volatility Index

1.4.3 Derivatives
This refers to a financial contract, the value of which is imparted by an underlying asset. Primarily
consisting of futures and options, these financial instruments can be used to negate a range of risks.
The different type of Derivatives are :

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• Forward- When two parties enter into an agreement to buy or sell an underlying asset at a
specified date and at an agreed price in the future, it is termed as a forward contract.
• Future- Just like the forward contract, a futures contract is an agreement to buy or sell an
underlying instrument at a specified price on a future date. In the futures contract, the buyer
and seller are not required to meet each other to enter into an agreement.
• Swaps- Out of the various types of derivatives contracts, swap contracts are the most
complicated. Swap contracts are private agreements between two parties. The parties to the
contract agree to exchange their cash flow in the future as per a predetermined formula.
• Options- Options contracts are the third type of derivatives contract. Options contracts are
very different from futures and forwards contracts as there is no compulsion to discharge
the contract on a certain date. Options contracts are those contracts that give the right but
not the obligation to buy or sell an underlying asset.

1.4.4 Bonds:
These are fixed-income debt instruments that are issued by both government and private-sector
companies with the objective to raise capital. Attaching a specific interest rate (mentioned during
the issue), a bond serves as a loan that must be repaid in full at a specified date. Different types of
Bonds are:
1.) Treasury bonds;

2) Investment-grade corporate bonds (high quality);

3) High-yield corporate bonds (low quality),

4) Foreign bonds;

5) Mortgage-backed bonds; and

6) Municipal bonds.

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1.5: Theoretical Background:

For the purpose of the study we are going to use the following tests to check the goodness of fit
and in order to good and reliable results:
1.5.1) Normality Test - The normal distribution is a comparatively simple distribution
involving only two parameters (mean and variance); it is very well known and its
theoretical properties have been extensively studied in mathematical statistics.

𝑌𝑖 = N(𝛽1 + 𝛽2 𝑋𝑖 , 𝜎2 )

1.5.2) Jarque Berra test- The JB test of normality is an asymptotic, or large-sample, test. It is
also based on the OLS residuals. This test first computes the skewness and kurtosis
measures of the OLS residuals.

S2 (𝑘−3)2
𝐽𝐵 = 𝑛[ + ]
6 24

1.5.3) Auto Correlation Test- The term autocorrelation may be defined as “correlation
between members of series of observations ordered in time [as in time series data] or
space [as in cross-sectional data].’’ In the regression context, the classical linear
regression model assumes that such autocorrelation does not exist in the disturbances
ui . Symbolically,

CoV = (𝑈𝑖 𝑈𝑗 |𝑋𝑖 𝑋𝑗 ) = 𝐸 (𝑈𝑖 𝑈𝑗) = 0 𝑤ℎ𝑒𝑟𝑒 𝑖 ≠ 𝑗

1.5.4) ADF test - This test is conducted by “augmenting” by adding the lagged values of the
dependent variable Yt. The ADF test here consists of estimating the following
regression:
𝑚

ΔYt = 𝛽1 + 𝛽2 𝑡 + 𝛿𝑌𝑡−1 + ∑ 𝛼𝑖 Δ𝑌𝑡−𝑖 + 𝜖𝑡

𝑖=1

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1.5.5) Heteroskedasticity Test- Heteroscedasticity is skewness in the distribution of one or
more regressors included in the model.
The Bruesh-Godfreuy symbolically:

𝑌𝑖 = 𝛽1 + 𝛽2 𝑋2 + ⋯ + 𝛽𝑘 𝑋𝑘𝑖 + 𝑢

1.5.6) Multi Collinearity Test- Originally it meant the existence of a “perfect,” or exact, linear
relationship among some or all explanatory variables of a regression model. The term
multicollinearity is due to Ragnar Frisch. Symbolically:

𝜆1 𝑋1 + 𝜆2 𝑋2 + ⋯ + 𝜆𝑘 𝑋𝑘 = 0

1.5.7) Multiple Regression Test- Multiple regression explains the relationship between one
dependent variable and multiple independent variables.

𝐸 (𝑌𝑖 |𝑋2𝑖 𝑋3𝑖 ) = 𝛽1 + 𝛽2 𝑋2𝑖 + ⋯ + 𝛽𝑛 𝑋𝑛𝑖

1.5.8) Granger Causality Test- Granger causality is a way to investigate causality between
two variables in a time series. The method is a probabilistic account of causality; it
uses empirical data sets to find patterns of correlation.

1.5.9) Johnson co-Integration Test- Johansen’s test is a way to determine if three or more time
series are cointegrated. More specifically, it assesses the validity of a cointegrating
relationship, using a maximum likelihood estimates (MLE) approach. It is also used to
find the number of relationships and as a tool to estimating those relationships.

Y = 𝛽1 ∗ 𝑋1 + 𝛽2 ∗ 𝑋2 + ⋯ + 𝛼

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1.6: Importance of the Topic:

a) This topic is relevant in today’s time because of the Geo Political and other agreements
between the economies which in turn leads to interdependence of the stock markets.
b) This study helps to analyse the cause and effect relationship the global stock market has on
the Indian stock market.
c) This research will help the day traders to be prepared for the day’s trading position as these
might be one of the reasons for the directional swing of the market.
d) This study aims at helping Indian investors to plan their investments accordingly.
e) The highlight and importance of the study is that we also aim to identify by how much is
the affect in terms of percentage.

1.7: Road Ahead:

Stock market as a profession is very lucrative and also not well suited for many. Though it may be
fascinating in monetary terms it requires tremendous skills and instantaneous decision-making
skills. However still the stock market is a taboo to be working in. On a wider perspective the stock
market has come a really long way from physical deliveries to deliveries through the internet, with
very few brokers being the leaders to many competitive leaders helping more people with better
facilities and advances technologies such as “Self-Operating Bots”. On a micro level, Indian stock
market participants account to only 5% on Indian population while the western countries such as
USA have around 45-48% of penetration level in the market. Therefore, there is a desperate need
for people to be educated more and more about the markets and also help them financially to be
independent. To conclude the road ahead especially for India has a huge potential with untapped
opportunities with many barriers to entry due to lack of knowledge.

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CHAPTER 2
Literature Review and Research Design
2: Literature review:

1. Searat Ali,Babar Zaheer Butt (2011) : Co movements between emerging and developed
stock market. After getting monthly closing stock prices of the selected stock market indices
for the period of July 1998 to June 2008, descriptive analyses were performed to find out the
temporal/stochastic properties of the data. All the series of data were then expressed in
logarithmic form. The returns for the period of July 1998 to June 2008 were calculated as the
logarithmic difference between the two consecutive prices. This study adopted the method of
Occam’s razor by simply filling in with the price of previous day. It is can be concluded with
evident from the results that there is no integration of the Pakistani stock market with the
markets of UK, USA, Taiwan, Malaysia and Singapore. It is found that the author has taken
only selected stocks from emerging and developed markets.

2. Theodore Syriopoulo (2007): Dynamic Linkages between Emerging European and

Developed Stock Markets: has the EMU any Impact. The impact of the EMU on the long-
run linkages of the four emerging CE and the developed stock markets is studied using co
integration methodology, and market behaviour is analysed in both the pre- and post-EMU
sub-periods. Emoerical methodology is adopted by the author. All the stocks of the EMU
countries are taken into consideration. Emu consists of Austria, Belgium, Finland, France,
Germany, Italy and Portugal. CE stock markets (Poland, Hungary, and Slovakia) tend to
display stronger linkages with their mature counterparts (Germany Us) rather than with the
other CE neighbours. Only central European and the other European markets are chose for the
study.

3. Heng Chen, Bento J. Lobo and Wing-Keung Won (2005): Links between the Indian, U.S.
and Chinese Stock Market. The researcher has fit a dynamic ordinary least squares
method. This is followed by establishment of granger causality two stage steps. They have
also employed long memory tests to find out the co integration. Specific selected stocks are
taken for this study. It is found that there is fractional co integration between the three
countries’ stock market. Only stocks of three countries namely India china and USA are taken
into consideration.

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4. Suchismita Bos and Paramita Mukherje (2006): A study of inter-linkages between the
Indian stock market and some other emerging and developed market. To find out the
linkages between Indian stock market and other (developed and developing markets) markets
such as Hongkong, Japan, Singapore, India and South Korea. The movement of the daily stock
prices corrected for exchange rates and base rates are captured. The author goes on to establish
correlation co efficient to find out the extension of association between the indices. Random
sampling has been identified in this study. The author aims at bringing out the correlation
between the stock indices through various statistical tests. Overall on daily basis, Indian index
is most highly correlated with sti, Malaysia, South Korea Taiwan and Thailand while least
correlated with US S&P 500. Only the selected stocks from Asian region are selected for the
research.

5. Kam C. Chan, Benton E. Gup and Ming-Shiun Pa (1997): international stock market
efficiency and integration: a study of eighteen nations. To find out the efficiency and
integration of the selected eighteen stock market, testing for stationary, both with the Dickey-
Fuller and the Phillips-Perron tests. International Research Journal of Finance and Economics
- Issue 7 (2007) Using a VAR model for the implementation of the Granger Causality test,
aims to identify interdependency between financial markets in the short-run. Co integration
tests as they were put forward by Johansen-Juselious, for pinpointing the long- run
relationships among the financial markets under investigation. The purpose is to grasp the
mechanism of influence exertion. In this context we use the Engle-Granger and Johansen tests
as well as the error correction model –ECM, which allows disequilibrium correction and the
attainment of long-run equilibrium. Variance Decomposition and estimating the Impulse
Response Functions. Random sampling method is adopted by the researcher. Results reveal
that both the long-run co integrating relationships and the short-run dynamic linkages among
major world financial markets are strengthened through time. The US global influence is
noticeable on all major world financial market. The researcher has taken only 18 stocks
keeping as USA market as independent variable and other stocks as dependent variable.

6. PongrapeepornAbhakorn, Peter N. Smith, Michael R. Wickens (2017): Can stochastic

discount factor models explain the cross-section of equity returns? We propose a
multivariate test of the capital asset pricing model (C-CAPM) of the cross-sectional variation
in equity returns in which we compare cross-sectional variation in equity returns to the cross-

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sectional variation in their conditional covariance with stochastic discount factors. C-CAPM,
Restricted CAPM, SDF models. We use a multivariate generalized heteroskedasticity in mean
model to estimate 25 portfolios that are formed on size and the book-to-market ratio. The data
are monthly from1960.2 to 2004.11 for the U.S. The return on the market portfolio is the
value-weighted return on all stocks. The return on a risk-free asset is the one-month Treasury
bill rate. C-CAPM with size and the book-to-market ratio as additional factors contains
information about cross-section average returns that is not captured by CAPM. No-arbitrage
test rejects C-CAPM as the model can explain the size effects, but not the value effect.
Although the consumption co-variances exhibit a negative relation with size, they do not vary
with the book-to-market ratio.

7. Ray Chou, Victor Ng, and Lynn Pi (August 1994): Co-integration of International Stock
Market Indices. In this paper we try to find out the relationship between the stock indices as
a result of their short term trading noises and long term co integrational relationship. Since
our co-integration study depends crucially on the non stationarity of the stock market prices
under consideration, our empirical exercise is composed of two parts: (1) testing for a unit
root in each price series, and (2) testing for the number of co-integrating vectors in the system
of stock market prices, provided that we cannot reject the null hypothesis of a unit root for
every stock market price series. To test for a unit root in each price series, we employ the
approach of Phillips and Perron (1988). This test method is preferred to the traditional
approach of Dickey and Fuller, as it is robust with respect to the presence of
heteroskedasticity. The empirical work in this paper is based on weekly data of the stock
market indices of the United States, the United Kingdom, Japan, France, Germany, and
Canada. The results suggest that there are long-run equilibrium relationships among the stock
market prices. Using subsets of countries, we find that the stock market prices of the three
European countries are cointegrated. Furthermore, the stock market prices of the United
States, Canada, and Japan are cointegrated. Only selected stocks of developed countries have
been taken for this test as population. The time duration has also been relatively very less.

8. Searat Ali Babar, Zaheer Butt and Kashif Ur Rehman Iqra University (2011):
Comovement Between Emerging and Developed Stock Markets: An Investigation
Through Cointegration Analysis. The paper aims at finding out the co-movement of
emerging and developed world stock markets and the each one has on the other. The study
encompassed monthly stock prices for the period of July 1998 to June 2008 consisted of 120

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observations extracted from the websites of stock markets and Yahoo Finance. After getting
monthly closing stock prices of the selected stock market indices for the period of July 1998
to June 2008, descriptive analyses were performed to find out the temporal/stochastic
properties of the data. All the series of data were then expressed in logarithmic form. The
returns for the period of July 1998 to June 2008 were calculated as the logarithmic difference
between the two consecutive prices. There is no short run relationship of Pakistan’s equity
market with the stock markets of China, UK, USA, Indonesia and Singapore. This implies
that any change in Pakistan stock market does not cause a change in the equity markets of
China, UK, and USA, Indonesia and Singapore or any change in the equity markets of these
countries do not lead to change in Pakistan’s equity market. There is unidirectional causality
running from Japan, Taiwan and Malaysia to the stock market of Pakistan. Only selected stock
indices are chosen for this study. Monthly data are chosen for this purpose.

9. Ramin Cooper Maysami Lee Chuin Howe Mohamad Atkin Hamzah (2004): Relationship
between Macroeconomic Variables and Stock Market Indices: Cointegration Evidence
from Stock Exchange of Singapore’s All-S Sector Indices. In this paper they have examined
the long-term equilibrium relationships between selected macroeconomic variables and the
Singapore stock market index (STI), as well as with various Singapore Exchange Sector
indices—the finance index, the property index, and the hotel index. Various macro-economic
factors such as interest raters, inflation, supply of money etc. are taken into consideration and
these are used as parameters for analysis. Examination of the dynamic relations between
macroeconomic variables and the various sector indices may be undertaken through either
Engle & Granger (1987) or Johansen and Juselius (1990) protocols. While Engle and Granger’s
(1987) two-step error correction model may be used in a multivariate context, the Johansen’s
(1990) VECM yields more efficient estimators of co-integrating vectors. This is because the
Johansen’s (1990) VECM is a full information maximum likelihood estimation model, which
allows for testing co-integration in a whole system of equations in one step, without requiring
a specific variable to be normalized. Our conclusions were that the Singapore stock market
and the SES All-S Equities Property Index formed significant relationships with all
macroeconomic variables identified, while the SES All-S Equities Finance Index and SES All-
S Equities Hotel Index form significant relationships only with selected variables. Only
Singapore market and major macro-economic factors affecting the market of Singapore was
taken into consideration.

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10. Komlavi Elubueni Assidenou (2011): Co-integration of Major Stock Market Indices
during the 2008 Global Financial Distress. The co integration of the selected stock markets
effect on each other there by suggesting investors based on the effects of each other market.
The empirical work is based on daily closing prices from September 2, 2008 to August 31,
2009 of the stock markets indices of the United States (S&P500), France (CAC40), Germany
(DAX), United Kingdom (FTSE), Sweden (OMXS), Japan (NIKKEI), Hong-Kong SAR
(HANG SENG), New Zealand (NZ50), South Korea (KS11), China Mainland (Shanghai Stock
Exchange Composite - SSEC) and China Province Taiwan (Taiwan Composite - TSEC). The
data on daily stock markets indices were downloaded from the Yahoo Finance website
(http://finance.yahoo.com). All prices were transformed and converted into U.S dollars in
order to harmonize different prices in one currency unit. Data on exchange rates were obtained
from the U.S Federal Reserve website which displays working days exchange rates between
major currencies. The analysis is based on the logarithm of the stock price series in U.S dollars.
The cointegration study depends on the non-stationarity of the stock markets prices of the
sample. The first exercise is to test for a unit root in each price series, the second is to test for
the cointegration between variables of the system of stock markets prices. There exists major
two co integration vectors for the pacific group and this suggest that there are long run run
equilibrium relationship between the stock market indices of this group of countries. The
researcher has however taken few and selected stock indices and the time period has been only
restricted to during 2008 global financial distress.

11. ChunxiaYang YanhuaChenLeiNiuQianLi (2014): Cointegration analysis and influence

rank—A network approach to global stock markets. Depending on the choice of stock
markets, sample periods and the frequency of observations (daily, weekly, monthly), many
scholars have made a great contribution to solving above problems. For instance, Jang and Sul
investigated the co-movement of seven Asian stock markets (i.e. Korea, Japan, Hong Kong,
Taiwan, Thailand, Indonesia, and Singapore). Use the natural log of daily stock market indices
of 26 different countries and regions around the world, which cover the period from January
2, 2002 to April 20, 2012. The 26 countries and regions are as follows: Netherlands (AEX),
Austria (ATX), France (FCHI), German (GDAXI), UK (FTSE), Norway (OSEAX), Sweden
(OMXSPI), Switzerland (SSMI), Russia (RTS), Australia (AORD), India (BSESN), Hong
Kong (HIS), VietNam (VN), Malaysia (KLSE), Korea (KS11), Japan (N225), China (SSEC),
Singapore (STI), Taiwan (TWII), Israel (TA_100), Brazil (BVSP), Mexico (MXX), Argentina
(MERV), Canada (GSPTSE), US (GSPC) and South African (JALSH). In order to investigate

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what is going on for the co-movements among different markets under impacts of global crises,
we divide the sample period into the following sub-periods. They found no significant linkages
among such markets before Asian financial crisis, however, the co-movement of Asian stock
markets increased during and even after the crisis.

12. PARESH KUMAR NARAYAN and RUSSELL SMYTH (2005): Co-integration of stock
markets between New Zealand, Australia and the g7 economies: searching for co-
movement under structural change. This paper aims to examine the bilateral relationship
between three stock markets namely :India ,China and USA. ▪ The objective of this paper is
to contribute to the literature on stock market integration through examining whether stock
prices in New Zealand are cointegrated with stock prices in Australia and stock prices in the
G7 economies (Canada, France, Germany, Italy, Japan, the United Kingdom (UK) and the
United States (US)) using monthly data. Implement the Johansen (1988) and Gregory and
Hansen (1996) approaches to cointegration we first have to establish the order of integration
of the variables. To ascertain the stationarity properties of each of the stock price indices we
commenced through implementing the conventional Augmented Dickey Fuller (ADF) and
Phillips and Perron (PP) unit root tests. ▪ In this paper we provide some evidence on the long-
run relationship between the New Zealand stock market and the stock markets of Australia and
the G7 economies. In addition to the Johansen (1988) test for cointegration, we have
implemented the Gregory and Hansen (1996) test, which allows for a structural shift in the
cointegration vector. Our results suggest that if we apply the cointegration test without a
structural break, there is no evidence of a long-run relationship between the New Zealand stock
market and the other stock market indices considered in the study.

13. Suchismita Bos and Paramita Mukherje (2006) A study of inter-linkages between the
Indian stock market and some other emerging and developed market. To find out the
linkages between Indian stock market and other (developed and developing markets) markets
such as Hong Kong, Japan, Singapore, India and South Korea. Tandom sampling has been
identified in this study. The author aims at bringing out the correllation between the stock
indices through various statistical tests. Overall on a daily basis, Indian index is most highly
correlated with sti, Malaysia, South Korea, Taiwan and Thailand while least correlated with
US S&P 500. Only the selected stocks from Asian region is selected for the research.

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14. Tantatape Brahmasrene, Komain Jiranyakul (2007): Cointegration and causality

between stock index and macroeconomic variables in an emerging market. This study
examined the relationship between stock market index and selected macroeconomic variables
during the post-financial liberalization (pre-financial crisis) and post financial crisis in
Thailand. The empirical analysis, unit root, cointegration and Granger causality tests were
performed. The results showed at least one co-integrating or long-run relation between the
stock market index and a set of macroeconomic variables. Money supply had a positive impact
on the stock market index while the industrial production index, the exchange rate and oil
prices had a negative impact. The stocks and the indices chosen were limited to only Thailand
and the time chosen for the study is very limited and extended only to pre and post financial
liberalization.

15. Chittedi, Krishna Reddy (2009): Global Stock Markets Development and Integration:
with Special Reference to BRIC Countries. The paper aims in finding out the co integration
of major world stock indices with special reference to bric countries and inter dependence of
the selected world stock indices. The study comprises daily stock market indices at closing
times as collected from the www.econstats.com and the validity of the data was checked from
respective stock exchange websites. Accordingly, our data series consist of the daily index
values of the, NASDAQ, FTSE-100, NIKKEI-225, Bovespa, Moscowtimes, Sensex and
Shanghai for US, UK, Japan, Brazil, Russia, India and China respectively. The period of study
is based on the collected data series 1998 -2008. ▪ The results of co integration shows co
integration relationship found between BRIC countries and Developed countries namely USA,
UK and Japan. The results of Error correction model reveal that Sensex, Nikki225,
moscowtimes, FTSE 100, and Bovespa are significant. It implies that these markets share the
forces of short run adjustment to long run equilibrium. The stock indices have been only with
references to BRIC countries and mostly contained to BRIC countries and developed countries.

16. Fernando Seabra (2001): A cointegration analysis between Mercosur and international
stock markets. This paper deals with an empirical investigation on the existence of long-run
relationships among the two most important Mercosur stock market indexes (the Argentine
Merval and the Brazilian Ibovespa) and two major international stock price indexes (the
Japanese Nikkei and the US Dow Jones) and also with the estimation of short-run responses
of those two emerging stock markets. Bivariate and multivariate cointegration tests are carried
out using the Engle and Granger (1987) two-step estimation technique and the standard
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Johansen (1988) maximum likelihood methodology. In both methods, a prerequisite for
cointegration is that the non-stationary series have the same order of integration (i.e. the
number of times a variable has to be di Œerenced to become stationary). Bivariate and
multivariate cointegration tests are carried out using the Engle and Granger (1987) two-step
estimation technique and the standard Johansen (1988) maximum likelihood methodology. In
both methods, a prerequisite for cointegration is that the non-stationary series have the same
order of integration (i.e. the number of times a variable has to be di Œerenced to become
stationary). This result can be seen as a drawback to a proposal of stock market integration in
Mercosur. On the other hand, cointegration between the two Latin American stock markets
and the Dow Jones cannot be rejected. Based on an error correction mechanism, the estimated
short-run elasticities show that the Ibovespa index is more responsive to changes in the Dow
Jones than the Merval index.

17. Hwey-Yun Yau, Chien-Chung Nieh (2008): Testing for cointegration with threshold
effect between stock prices and exchange rates in Japan and Taiwan. This paper
empirically investigates the exchange rate effects of the New Taiwan dollar against the
Japanese Yen (NTD/JPY) on stock prices in Japan and Taiwan from January 1991 to Mach
2008. This paper aims to empirically investigate the asymmetric causal relationships between
NTD/JPY and the stock prices of Japan and Taiwan, respectively. Furthermore, we extend our
research taking into account the effect of the U.S. exchange rate specifically on Taiwan’s
financial market. To fully capture the causal relations among variables investigated, our study
employs non-linear examinations. ▪ This paper looks at NTD/JPY, NTD/USD, closing
Taiwan Stock Exchange Index (TW Stock), and the Nikkei 225 Index (JP Stock). Data are
collected from the AREMOS Statistical Data Bank of Taiwan’s Ministry of Education.
Considering that there may be more fluctuations in daily data, this study adopts monthly data.
The sample period runs from January 1991 to Mach 2008, with a total of 207 monthly
observations obtained for each variable. This paper looks at NTD/JPY, NTD/USD, closing
Taiwan Stock Exchange Index (TW Stock), and the Nikkei 225 Index (JP Stock). Data are
collected from the AREMOS Statistical Data Bank of Taiwan’s Ministry of Education.
Considering that there may be more fluctuations in daily data, this study adopts monthly data.
The sample period runs from January 1991 to Mach 2008, with a total of 207 monthly
observations obtained for each variable. The research has been carried out only for a short
period of time and the test conducted such as Granger causality has been restricted to only
short time and the exchange rates.

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18. Daniel Della Maggiora Robert Skerman (2009): Johansen cointegration analysis of
American and European stock market indices: an empirical study. The aim of this study
is to investigate and conclude any such cointegration relationships between 4 specified
European stock markets and the American stock market. Using data from the last 8 years,
which includes the “Global Financial Crisis” commencing 2007, can help investors determine
possible international diversification benefits over periods of time including times during
extreme economic downturn. The Johansen’s Cointegration Method to determine the existence
of any cointegrating vectors between selected indices. 8-year (April 2001-April 2009) daily
closing prices of the following indices have been used: S&P500, FTSE100, DAX30, CAC40,
OMX30. Cointegration analysis using the Johansen Method on 3 different sample periods (2-
, 4-, and 8-year samples) concluded evidence of one cointegrating vector in the 2 and 8 year
samples while the 4 year data gave mixed results suggesting the economic shock (Global
Financial Crisis) of 2007 and on may have affected those results. Overall, we conclude little
diversification benefits between the markets studied in the long-term, but see possible
opportunities for excess returns in the short-term. The research has been restricted to only to
the developed stock indices of American and European Stock market Indices.

2.1 Statement of the problem:

The Indian Stock market is affect by innumerable things that happen on a particular day starting
from the quarterly results, political announcements and majrr events that may take place on a
particular . These and such events cannot be listed .Of the all factors that might affect the Indian
Stock Market, the world stock market may also be a probable factor that might affect the Indian
stock market. We try to find out how much and which all indices are affecting the Indian stock
market and how much. The relativity between the markets without that of Indian stock market may
play a pivotal role in guiding both the investors and the traders to help them take their stance.

2.2 Scope of the study:

The scope of the study includes the two different markets have their own players in the ground
who know the game well in their own terms. The study is for those who would like to enter and
also for those who would like to reconsider their presence in either of the markets. The data for

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five years will be collected and analysed using different statistical techniques and described with
proper justifications. This study also focuses on the various internal problems of the markets and
sheds light on them.

2.3 Objectives of the study:

• To know if there is interdependence of Indian Stock market with the World Market.
• To compare the percentage of effect it has if affirmative.
• To find out the cause and effect of the major selected equity market.
• To help the investors and day traders to plan the actions accordingly.

2.4 Hypothesis:

1. Normality:
a. Ho : The Errors are Normally Distributed
H1: The Errors are not Normally Distributed
2. Multiple Regression:
a. H0: There is no Significant impact of World Stock Market to Indian Stock
Market.
H1: There is Significant impact of World Stock Market to Indian Stock
Market.
3. Stationary Test:
a. H0: The data are non-stationary (Unit Root Problem)
H1:: The data are Stationary (No- Unit Root Problem)

2.5 Sampling plan:

For the purpose of this research we have taken/chosen stratified sampling. We have carried a
detailed descriptive study research method for this project.

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2.6 Tools for Data Collection:

The data collected are mainly from the secondary sources. No primary data has been used for this
study.

Data has been collected from various websites such as NSE, BSE , Yahoo finance and respective
stock indices websites for their data.

2.7 Data analysis:

According to the objective of the study secondary data will be collected from the secondary
sources. The data will be analysed with the help of tables, graphs and descriptive statistics,
econometric tools and concludes with findings and suggestions. The collected data is represented
in pictorial graphs and charts. Analysis will be done wherever required.

2.8 Limitations of the study:

• The study is done from the Indian perspective.

• The study is based on the data of last 20 years only.
• The study is based on monthly closing prices of the indices.
• Only selected indices are considered.

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Chapter -3
Profile of the Organization

3.1: National Stock Exchange and Bombay Stock Exchange

The National Stock Exchange of India Limited (NSE) is the main stock trade of India, situated in
Mumbai. The NSE was built up in 1992 as the primary dematerialized electronic trade in the
nation. NSE was the principal trade in the nation to give a cutting edge, completely robotized
screen-based electronic exchanging framework which offered simple exchanging office to the
financial specialists spread over the length and expansiveness of the nation. Vikram Limaye is
Managing Director and Chief Executive Officer of NSE.

National Stock Exchange has an all-out market capitalization of more than US$2.27 trillion,
making it the world's eleventh biggest stock trade as of April 2018. NSE's leader list, the NIFTY
50, the 50 stock file is utilized broadly by speculators in India and around the globe as an indicator
of the Indian capital markets. Clever 50 records were propelled in 1996 by the NSE. However,
Vaidyanathan (2016) gauges that just about 4% of the Indian economy/GDP is really gotten from
the stock trades in India.

Not at all like nations like the United States where almost 70% of the GDP is gotten from bigger
organizations and the corporate area, the corporate part in India represents just 12-14% of the
national GDP (as of October 2016). Of these lone 7,800 organizations are recorded of which just
4000 exchange on the stock trades at BSE and NSE. Henceforth the stocks exchanging at the BSE
and NSE represent just around 4% of the Indian economy, which determines the majority of its
salary related action from the alleged chaotic part and households.

Monetary Times assessed that as of April 2018, 60 million (6 crore) retail speculators had put their
reserve funds in stocks in India, either through direct acquisition of values or through shared funds.
Earlier, the Bimal Jalan Committee report evaluated that scarcely 1.3% of India's populace put
resources into the financial exchange, when contrasted with 27% in USA and 10% in China.

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NATIONAL STOCK EXCHANGE was fused in the time of 1992 to get straightforwardness in
the business sectors. Rather than exchanging participation being restricted to a gathering of
merchants, NSE guaranteed that any individual who was qualified, experienced and met least
money related necessities was permitted to trade. In this specific situation, NSE was in front of its
occasions when it isolated proprietorship and the executives in the trade under SEBI's watch. The
value data which could prior be gotten to just by a bunch of individuals could now be seen by a
customer in a far off area without hardly lifting a finger. The paper-based settlement was
supplanted by electronic store based records and settlement of exchanges was constantly done on
schedule. One of the most basic changes was that a hearty hazard the board framework was set up,
so settlement assurances could secure financial specialists against intermediary defaults.

NSE was set up by a gathering of driving Indian money related foundations at the command of the
administration of India to carry straightforwardness to the Indian capital market. In light of the
proposals spread out by the Pherwani panel, NSE has been built up with an enhanced shareholding
involving local and worldwide speculators. The key local financial specialists incorporate Life
Insurance Corporation of India, State Bank of India, IFCI Limited, IDFC Limited and Stock
Holding Corporation of India Limited. Also, the key worldwide financial specialists are Gagil FDI
Limited, GS Strategic Investments Limited, SAIF II SE Investments Mauritius Limited, Aranda
Investments (Mauritius) Pte Limited and PI Opportunities Fund I.

The trade was fused in 1992 as a duty paying organization and was perceived as a stock trade in
1993 under the Securities Contracts (Regulation) Act, 1956, when P. V. Narasimha Rao was the
Prime Minister of India and Manmohan Singh was the Finance Minister. NSE initiated activities
in the Wholesale Debt Market (WDM) portion in June 1994. The capital market (values) portion
of the NSE started tasks in November 1994, while activities in the subsidiaries fragment initiated
in June 2000. NSE offers exchanging, clearing and repayment administrations in value, value
subsidiaries, obligation, item subordinates, and money subordinates fragments. It was the first
trade in quite a while to present an electronic exchanging office in this manner associating together
the financial specialist base of the whole nation. NSE has 2500 VSATs and 3000 rented lines
spread over in excess of 2000 urban areas across India.

NSE was likewise instrumental in making the National Securities Depository Limited (NSDL)
which permits speculators to safely hold and move their offers and bonds electronically. It likewise
permits financial specialists to hold and exchange as not many as one offer or bond. This made
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holding money related instruments helpful as well as more critically, dispensed with the
requirement for paper testaments and enormously decreased the episodes of fashioned or phony
endorsements and fake exchanges that had tormented the Indian financial exchange. The NSDL's
security, joined with the straightforwardness, lower exchange costs and productivity that NSE
offered, incredibly expanded the engaging quality of the Indian financial exchange to local and
global speculators.

3.2: Bombay Stock Exchange

While BSE Ltd is currently interchangeable with Dalal Street, it was not generally so. In 1850s,
five stock agents assembled under Banyan tree before Mumbai Town Hall, where Horniman Circle
is presently arranged. After 10 years, the agents moved their area to another verdant setting, this
time under banyan trees at the intersection of Meadows Street and what was then called Esplanade
Road, presently Mahatma Gandhi Road. With a fast increment in the quantity of agents, they
needed to move puts over and again. Finally, in 1874, the specialists found a perpetual area, the
one that they could call their own. The new spot was, appropriately, called Dalal Street (Brokers'
Street). The representatives bunch turned into an official association known as "The Native Share
and Stock Brokers Association" in 1875.

On August 31, 1957, the BSE turned into the principal stock trade to be perceived by the Indian
Government under the Securities Contracts Regulation Act. In 1980, the trade moved to the
Phiroze Jeejeebhoy Towers at Dalal Street, Fort territory. In 1986, it built up the S&P BSE
SENSEX record, giving the BSE a way to gauge the general execution of the trade. In 2000, the
BSE utilized this list to open its subordinates showcase, exchanging S&P BSE SENSEX fates
contracts. The improvement of S&P BSE SENSEX alternatives alongside value subsidiaries
followed in 2001 and 2002, growing the BSE's exchanging stage.

Verifiably an open objection floor exchanging trade, the Bombay Stock Exchange changed to an
electronic exchanging framework created by CMC Ltd. in 1995. It took the trade just 50 days to
make this progress. This robotized, screen-put together exchanging stage called BSE With respect
to Line Trading (BOLT) had a limit of 8 million requests for every day. Presently BSE has raised
capital by giving offers and as on 3 May 2017 the BSE share which is exchanged NSE just shut
with Rs.999.

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The BSE is likewise a Partner Exchange of the United Nations Sustainable Stock Exchange
activity, participating in September 2012.

BSE set up India INX on 30 December 2016. India INX is the main global trade of India.
BSE dispatches item subsidiaries contract in gold, silver.

3.3: New York Stock Exchange:

The soonest recorded association of protections exchanging New York among agents
straightforwardly managing each other can be followed to the Buttonwood Agreement.
Beforehand, protections trade had been intermediated by the barkers, who additionally directed
increasingly commonplace closeouts of items, for example, wheat and tobacco. On May 17, 1792,
twenty four merchants consented to the Buttonwood Arrangement, which set a story commission
rate charged to customers and bound the underwriters to offer inclination to different endorsers in
protections deals. The soonest protections exchanged were generally administrative protections,
for example, War Bonds from the Revolutionary War and First Bank of the United States stock,
in spite of the fact that Bank of New York stock was a non-legislative security exchanged the early
days. The Bank of North America, alongside the First Bank of the United States and the Bank of
New York, were the principal shares exchanged on the New York Stock Exchange.

In 1817, the stockbrokers of New York, working under the Buttonwood Agreement, established
new changes and rearranged. In the wake of sending an appointment to Philadelphia to watch the
association of their leading group of representatives, limitations on manipulative exchanging were
received, just as formal organs of administration. After re-framing as the New York Stock and
Exchange Board, the intermediary association started leasing space solely for protections
exchanging, which recently had been occurring at the Tontine Coffee House. A few areas were
utilized somewhere in the range of 1817 and 1865, when the current area was embraced.

The innovation of the electrical message united markets and New York's market rose to
predominance over Philadelphia in the wake of enduring some market freezes superior to different
other options. The Open Board of Stock Brokers was built up in 1864 as a contender to the NYSE.
With 354 individuals, the Open Board of Stock Brokers equalled the NYSE in participation (which
had 533) "on the grounds that it utilized an increasingly present day, nonstop exchanging
framework better than the NYSE's twice-day by day call meetings". The Open Board of Stock
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Brokers converged with the NYSE in 1869. Robert Wright of Bloomberg composes that the merger
expanded the NYSE's individuals just as exchanging volume, as "a few dozen provincial trades
were additionally rivalling the NYSE for clients. Purchasers, merchants and sellers all needed to
finish exchanges as fast and inexpensively as mechanically conceivable and that implied finding
the business sectors with the most exchanging, or the best liquidity in the present speech. Limiting
rivalry was fundamental to keep countless requests streaming, and the merger helped the NYSE
keep up its notoriety for giving predominant liquidity." The Civil War significantly invigorated
theoretical protections exchanging New York. By 1869, participation must be topped, and has been
inconsistently expanded since. The last 50% of the nineteenth century saw quick development in
protections exchanging.

Protections exchange the last nineteenth and mid twentieth hundreds of years was inclined to
frenzies and accidents. Government guideline of protections exchanging was in the end observed
as vital, with ostensibly the most sensational changes happening during the 1930s after a
significant securities exchange crash accelerated the Great Depression.

The Stock Exchange Luncheon Club was arranged on the seventh floor from 1898 until its
conclusion in 2006.

The primary structure, situated at 18 Broad Street, between the edges of Wall Street and Exchange
Place, was assigned a National Historic Landmark in 1978, as was the 11 Wall Street building.

On April 21, 2005, the NYSE declared its arrangements to converge with Archipelago in an
arrangement proposed to rearrange the NYSE as a traded on an open market organization. NYSE's
overseeing board casted a ballot to converge with rival Archipelago on December 6, 2005, and
turned into a revenue driven, open organization. It started exchanging under the name NYSE
Group on March 8, 2006. On April 4, 2007, the NYSE Group finished its merger with Euronext,
the European joined securities exchange, in this way shaping NYSE Euronext, the main
transoceanic stock trade.

Money Street is the main US cash place for worldwide monetary exercises and the principal US
area for the direct of discount budgetary administrations. "It involves a framework of discount
budgetary areas, money related markets, monetary establishments, and budgetary industry firms"

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(Robert, 2002). The chief parts are protections industry, business banking, resource the executives,
and protection.

Before the obtaining of NYSE Euronext by the ICE in 2013, Marsh Carter was the Chairman of
the NYSE and the CEO was Duncan Niederauer. Currently, the executive is Jeffrey Sprecher. In
2016, NYSE proprietor Intercontinental Exchange Inc. earned $419 million in postings related
incomes.

3.4: Switzerland Stock Exchanges:

The principal trades in Switzerland were made locally in significant Swiss urban areas all through
Switzerland, with the approval of the Cantonal specialists. Geneva made ready in the year 1850,
when the Société des specialists de change réunis (English: United Brokers Association) was
established. Its exchanging floor was opened in 1855 and endorsed by the Grand Council of
Geneva in 1856.[6] The Basler Börse followed in 1866 or 1876 (sources dissent) in Basel, just as
another in Zürich in 1873.The Berne trade, which despite everything exists today, was established
in 1884. Littler trades were additionally made in Lausanne in 1873, in St. Gallen in 1887 and in
Neuchâtel in 1905.The trades were subject by the Cantons to a worth included duty.

During the First World War, every Swiss trade were shut, except for bond exchanging the Geneva
trade. The downturn of 1920–21 was trailed by a positively trending market during the 1920s,
during which another trade building (alte Börse, German for "old trade") was built in Zurich at
Bleicherweg 5, close Paradeplatz. The structure is as yet standing, however not, at this point
utilized as a trade.

After the Great Depression of the 1930s, a government banking law was presented. This law is
still as a result today and, in its structure starting at 2020, requires authorization by the FINMA to
do banking exercises, just as due persistence and banking mystery. A trade law was likewise talked
about, however not presented. At long last, Swiss trades were required to join under a protections
trade relationship so as to set up an enlistment office, so the Swiss National Bank could have the
ideal impact.

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Post-war era
After the Second World War, banking charges for exchanges on trades were brought together in a
dealer meeting. In the 1950s, the incomes of the trades arrived at new highs as in times previously
or between the wars until 1929. This advancement proceeded until the Kennedy Slide of 1962,
which was activated by measures against the monetary lull, the New York crash, and the Cuba
emergency.

Following the deregulation and the end of the Bretton Woods System (fixed trade rates) by the
United States, during the 1970s, a basic change of the economy and of the monetary scene began,
which is as yet progressing today. Fluctuating trade rates conveyed new dangers for the economy
and a requirement for supporting arrangements emerged. Money subsidiaries were acquainted as
a reaction with this need and in 1973, the Chicago Board Options Exchange was made as a trade
that lone handles subordinates. With the oil emergency of 1974, the economy experienced the
greatest after-war downturn since 1931. In Switzerland, the oil stun prompted such a scramble for
venture cash that it was considered to close the trades.

3.5: German Stock Exchange

The sources of the Frankfurt Stock Exchange return to medieval exchange fairs the eleventh
century. By the sixteenth century Frankfurt formed into a rich and occupied city with an economy
dependent on exchange and budgetary administrations.

In 1585 a bourse was built up to set up fixed cash trade rates, which is considered to stamp the
'birth' of the stock trade. During the next hundreds of years Frankfurt formed into one of the world's
first stock trades - close to London and Paris. Investors like Mayer Amschel Rothschild and Max
Warburg had considerable effect on Frankfurt's monetary exchange.

In 1879 Frankfurt Stock Exchange moved into its new structure at Börsenplatz.

It was distinctly in 1949 after World War II that the Frankfurt Stock Exchange at last settled as the
main stock trade in Germany with thusly approaching national and universal speculations.

During the 1990s the Frankfurt Stock Exchange was likewise bourse for the Neuer Markt (German
for New Market) as a feature of the overall website blast.

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In 1993 the Frankfurter Wertpapierbörse (Frankfurt Stock Exchange) became Deutsche Börse AG,
working organizations for the trade.

From the mid-1960s onwards the Frankfurt Stock Exchange exploited the near to Bundesbank
which successfully settled on monetary arrangements in Europe until the presentation of the euro
in 2002. From that point forward the trade benefits from the nearness of the European Central
Bank in Frankfurt.

In 2002 and 2004 Deutsche Börse was in cutting edge dealings to assume control over London
Stock Exchange, which were severed in 2005.A further merger offer was obstructed by the
European Commission in 2017.

3.6: Netherlands stock exchange:

The Amsterdam stock trade is considered the most seasoned "present day" protections advertise in
the world. The Amsterdam Stock Exchange was built up in 1602 by the Dutch East India Company
(Verenigde Oostindische Compagnie, or "VOC") for dealings in its printed stocks and bonds. It
was in this manner renamed the Amsterdam Bourse and was the first to officially start exchanging
quite a while.

Preceding that, the market existed fundamentally for the trading of commodities. In 1602, the
State’s General of the Netherlands conceded the VOC a 21-year sanction over all Dutch exchange
Asia and semi legislative forces. The monopolistic terms of the contract adequately conceded the
VOC complete authority over exchange resistances, war deadly implements, and political
undertakings in Asia. The first worldwide enterprise with critical asset interests was along these
lines built up. Likewise, the significant level of hazard related with exchange Asia gave the VOC
its private proprietorship structure. Following in the strides of the English East India Company,
stock in the partnership was offered to an enormous pool of intrigued financial specialists, who
thus got an assurance of some future portion of profits. In the Amsterdam East India House alone,
1,143 speculators bought in for over ƒ3,679,915 or €100 million in the present money.

The journey to the valuable assets in the West Indies was unsafe. Dangers of privateers, ailment,
hardship, wreck, and different macroeconomic variables increased the hazard factor and along
these lines made the outing fiercely costly. In this way, the stock issuance made conceivable the
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spreading of hazard and profits over a pool of speculators. Should something turn out badly on the
journey, hazard was alleviated and scattered all through the pool and speculators all endured only
a small amount of the all-out cost of the journey.

The arrangement of privatizing national undertakings was not new to Europe, yet the fixed stock
structure of the East India Company made it unique. In the decade going before the development
of the VOC, bold Dutch traders had utilized a comparative technique for "private association" to
fund costly journeys toward the East Indies for their own gain. The aggressive vendors pooled
cash together to make transporting organizations for investigation of the East Indies. They
expected a joint-portion of the fundamental arrangements (for example shipbuilding, loading,
route) as an end-result of a joint-portion of the profits. These Voorcompagnieën took on
extraordinary hazard to procure a portion of the compensating zest exchange the East Indies,
however presented a typical type of the joint-stock endeavour into Dutch transportation.

Albeit a portion of these journeys typically fizzled, the ones that were fruitful brought guarantee
of riches and a developing new exchange. Soon after these campaigns started, in 1602, the
numerous free Voorcompagnieën converged to frame the Dutch East India Trading Company.
Shares were dispensed suitably by the Amsterdam Stock Exchange and the joint-stock vendors
turned into the chiefs of the new VOC. Furthermore, this new super organization was quickly
perceived by the Dutch regions to be similarly significant in administrative strategies. The VOC
was conceded critical war-time controls, the option to assemble fortresses, the option to keep up a
standing armed force, and consent to direct exchanges with Asian countries. The contract made a
Dutch pioneer region in Indonesia, with a restraining infrastructure on Euro-Asian exchange.

The membership terms of each stock buy offered investors the choice to move their offers to an
outsider. Rapidly an optional market emerged in the East India House for resale of this stock
through the official clerk. After an understanding hosted been reached between the two gatherings,
the offers were then moved from merchant to purchaser in the "capital book." The official record,
held by the East India House, urged financial specialists to exchange and offered ascend to
showcase certainty that the offers weren't simply being moved on paper. Thus, theoretical
exchanging promptly followed and the Amsterdam protections advertise was conceived.

A major quickening in the turnover rate came in 1623, after the 21-year liquidation period for the
VOC finished. The provisions of the underlying contract required a full liquidation following 21
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years to disseminate benefits to investors. Be that as it may, right now neither the VOC nor its
investors saw an easing back down of Asian exchange, so the States General of the Netherlands
conceded the partnership a second sanction in the West Indies.

This new contract gave the VOC extra years to remain in business be that as it may, as opposed to
the main sanction, laid out no designs for guaranteed liquidation, implying that the cash
contributed remained contributed, and profits were paid to financial specialists to boost
shareholding. Speculators took to the optional market of the recently developed Amsterdam Stock
Exchange to offer their offers to third parties. These "fixed" capital stock exchanges amassed
colossal turnover rates, and made the stock trade immensely increasingly significant. Along these
lines the advanced protections advertise emerged out of this arrangement of stock trade.

The quick improvement of the Amsterdam Stock trade in the mid seventeenth century lead to the
arrangement of exchanging clubs around the city. Merchants met every now and again, regularly
in a neighbourhood bistro or motels to talk about money related exchanges. Along these lines,
"Sub-markets" developed, in which brokers approached peer information and a network of
legitimate merchants.

These were especially significant during exchanging the late seventeenth century, where
momentary theoretical exchanging commanded. The exchanging clubs permitted financial
specialists to accomplish significant data from respectable dealers about the fate of the protections
trade. Experienced brokers within hover of these exchanging clubs had a slight bit of leeway over
every other person, and the commonness of these clubs assumed a significant job in the proceeded
with development of the stock trade itself.

Also, similitudes can be drawn between advanced representatives and the accomplished merchants
of the exchanging clubs. The system of dealers took into account sorted out development of
information and speedy execution of exchanges. In this manner, the optional market for VOC
shares turned out to be incredibly proficient, and exchanging clubs had no little influence.
Specialists took a little expense in return for an assurance that the desk work would be properly
documented and a "purchaser" or "vender" would be found. All through the seventeenth century,
financial specialists progressively looked for experienced merchants to look for data about a
potential counterparty.

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The European Options Exchange (EOE) was established in 1978 in Amsterdam as a prospects and
choices trade. In 1983 it began a securities exchange record, called the EOE list, comprising of the
25 biggest organizations that exchange on the stock trade. Forward agreements, alternatives, and
other advanced instruments were exchanged on the Amsterdam Stock Exchange a long time before
this.

In 1997 the Amsterdam Stock Exchange and the EOE blended, and its blue-chip record was
renamed AEX, for "Amsterdam Exchange". It is presently overseen by Euronext Amsterdam. On
3 October 2011, Princess Maxima opened the new exchanging floor of the Amsterdam Stock
Exchange.
The previous Stock Exchange building was the Beurs van Berlage.
Despite the fact that it is normally viewed as the principal financial exchange, Fernand Braudel
contends this isn't definitely evident:

"It isn't exactly precise to call [Amsterdam] the principal securities exchange, as individuals
frequently do. State advance stocks had been debatable at an early date in Venice, in Florence
before 1328, and in Genoa, where there was a functioning business sector in the luoghi and paghe
of Casa di San Giorgio, also the Kuxen partakes in the German mines which were cited as right on
time as the fifteenth century at the Leipzig fairs, the Spanish juros, the French rentes sur l'Hotel de
Ville (metropolitan stocks) (1522) or the financial exchange in the Hanseatic towns from the
fifteenth century. The resolutions of Verona in 1318 affirm the presence of the settlement or
forward market.

3.7: Hong Kong stock exchange:

The Hong Kong securities market can be followed back to 1866, however the securities exchange
was officially set up in 1891, when the Association of Stockbrokers in Hong Kong was established.
It was renamed The Hong Kong Stock Exchange in 1914.

By 1972, Hong Kong had four stock trades in activity. There were along these lines requires the
arrangement of a bound together stock trade. The Stock Exchange of Hong Kong Limited was
joined in 1980 and exchanging on the trade at long last initiated on 2 April 1986. Since 1986,
various significant improvements have occurred. The 1987 market crash uncovered defects in the
market and prompted requires a total change of the Hong Kong protections industry. This
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prompted noteworthy administrative changes and infrastructural improvements. Accordingly, the
Securities and Futures Commission (SFC) was set up in 1989 as the single legal protections
showcase controller.

The market foundation was much improved[how?] with the presentation by the trading of the
Central Clearing and Settlement System (CCASS) in June 1992 and the Automatic Order Matching
and Execution System (AMS) in November 1993. From that point forward, the structure of market
rules and guidelines, both trade controlled or something else, have been experiencing proceeding
with audit and update to meet changing business sector needs while guaranteeing compelling
business sector guideline.
The Exchange Listing Rules have been made progressively far reaching, and other existing
guidelines have been improved or new guidelines acquainted with upgrade showcase advancement
and speculator security. Upgrades were likewise made to the framework foundation, including the
dispatch of off-floor exchanging terminals intermediaries' workplaces in January 1996. The third
era of the exchanging framework, AMS/3, will be propelled in 2000. It will give upgraded
usefulness and a stage for a straight-through exchange process.

In regard of market and item improvement, there are the posting of the principal subsidiary warrant
in February 1988, the posting of the primary China-fused venture (H share) in July 1993; and the
presentation of controlled short selling in January 1994 and investment opportunities in September
1995. Moreover, the trade presented the Growth Enterprise Market (GEM) in November 1999 to
give raising money chances to development organizations of all sizes from all ventures, and to
advance the improvement of innovation businesses in the area.

As indicated by the change plan declared in March 1999, the Exchange, the Hong Kong Futures
Exchange and their clearing houses converged into another holding organization, the Hong Kong
Exchanges and Clearing Limited.

3.8: Shanghai Stock Market:

The arrangement of the International Settlement (remote concession regions) in Shanghai was the
consequence of the Treaty of Nanking of 1842 (which finished the First Opium War) and resulting
understandings between the Chinese and outside governments were essential to the improvement
of remote exchange China and of the outside network in Shanghai. The market for protections
exchanging Shanghai starts in the late 1860s. The main offers list showed up in June 1866 and by
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then Shanghai's International Settlement had built up the conditions helpful for the rise of an offer
market: a few banks, a legitimate structure for business entities, and an enthusiasm for expansion
among the set up exchanging houses (in spite of the fact that the exchanging houses themselves
remained associations).

In 1891 during the blast in mining shares, remote specialists established the "Shanghai Share
brokers’ Association" headquartered in Shanghai as China's first stock trade. In 1904 the
Association applied for enrolment in Hong Kong under the arrangement of the Companies mandate
and was renamed as the "Shanghai Stock Exchange". The gracefully of protections came basically
from neighbourhood organizations. In the good 'ol days, banks commanded private offers be that
as it may, by 1880, just the Hong Kong and Shanghai nearby banks remained.

Later in 1920 and 1921, "Shanghai Securities and Commodities Exchange" and "Shanghai Chinese
Merchant Exchange" began activity individually. An amalgamation in the long run occurred in
1929, and the consolidated markets worked from that point as the "Shanghai Stock Exchange".
Delivery, protection, and docks endured to 1940 however were eclipsed by mechanical offers after
the Treaty of Shimonoseki of 1895, which allowed Japan, and by augmentation different countries
which had bargains with China, to build up industrial facilities in Shanghai and other settlement
ports. Elastic ranches turned into the staple of stock exchanging starting the second decade of the
twentieth century.

By the 1930s, Shanghai had risen as the money related focus of the Far East, where both Chinese
and remote speculators could exchange stocks, debentures, government securities, and prospects.
The activity of Shanghai Stock Exchange went to a sudden stop after Japanese soldiers involved
the Shanghai International Settlement on December 8, 1941. In 1946, the Shanghai Stock
Exchange continued its tasks before shutting again 3 years after the fact in 1949, after the
Communist transformation occurred.

After the Cultural Revolution finished and Deng Xiaoping rose to control, China was re-opened
to the outside world in 1978. During the 1980s, China's protections showcase advanced couple
with the nation's monetary change and opening up and the improvement of communist market
economy. On 26 November 1990, the Shanghai Stock Exchange was restored and activities started
half a month later on 19 December.

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In 2019, the Shanghai Stock Exchange propelled the STAR Market, including just innovation
related organizations, as an opponent to the NASDAQ.

3.9: London Stock Exchange

Coffee House
The Royal Exchange had been established by English lender Thomas Gresham and Sir Richard
Clough on the model of the Antwerp Bourse. It was opened by Elizabeth I of England in 1571.

During the seventeenth century, stockbrokers were not permitted in the Royal Exchange because
of their discourteous habits. They needed to work from different foundations in the region,
prominently Jonathan's Coffee-House. At that café, an agent named John Castaing began posting
the costs of a couple of wares, for example, salt, coal, and paper, and trade rates in 1698. Initially,
this was not a day by day list and was just distributed a couple of days of the week.

This rundown and action was later moved to Garraway's café. Open sell-offs during this period
were led for the term that a length of fat light could consume; these were known as "by inch of
flame" barters. As stocks developed, with new organizations joining to raise capital, the imperial
court additionally raised some monies. These are the soonest proof of sorted out exchanging
attractive protections in London.

Royal Exchange
After Gresham's Royal Exchange building was devastated in the Great Fire of London, it was
modified and restored in 1669. This was a move away from cafés and a stage towards the cutting
edge model of stock trade.

The Royal Exchange housed expedites as well as traders and product. This was the introduction
of a controlled financial exchange, which had early stage struggles looking like unlicensed dealers.
So as to direct these, Parliament passed an Act in 1697 that imposed substantial punishments, both
money related and physical, on those handling without a permit. It additionally set a fixed number
of intermediaries (at 100), yet this was later expanded as the size of the exchange developed. This
limit prompted a few issues, one of which was that merchants started leaving the Royal Exchange,
either by their own choice or through removal, and began managing in the avenues of London.
The road wherein they were presently managing was known as 'Trade Alley', or 'Change Alley'; it

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was appropriately positioned near the Bank of England. Parliament attempted to control this and
restriction the informal brokers from the Change avenues.

Merchants got tired of "bubbles" when organizations rose rapidly and fell, so they convinced
Parliament to pass a condition forestalling "unchartered" organizations from framing.

After the Seven Years' War (1756–1763), exchange at Jonathan's Coffee House blasted once more.
In 1773, Jonathan, along with 150 different specialists, framed a club and opened another and
progressively formal "Stock Exchange" in Sweeting's Alley. This currently had a set extra charge,
by which brokers could go into the stock room and exchange protections. It was, be that as it may,
not a selective area for exchanging, as exchanging likewise happened in the Rotunda of the Bank
of England. Extortion was additionally overflowing during these occasions and so as to hinder
such dealings, it was proposed that clients of the stock room pay an expanded expense. This was
not met well and eventually, the arrangement came as yearly charges and transforming the
Exchange into a Subscription room.

The Subscription room made in 1801 was the primary managed trade in London, yet the change
was not invited by all gatherings. On the primary day of exchanging, non-individuals must be
removed by a constable. Regardless of the confusion, another and greater structure was arranged,
at Capel Court.

William Hammond established the main framework stone for the new structure on 18 May. It was
done on 30 December when "The Stock Exchange" was chiselled on the passageway.

First Rule Book

In the Exchange's initially working years, on a few events there was no away from of guidelines
or central laws for the Capel Court exchanging. In February 1812, the General Purpose Committee
affirmed a lot of proposals, which later turned into the establishment of the principal arranged
standard book of the Exchange. Despite the fact that the report was not a perplexing one, themes,
for example, settlement and default were, truth be told, very exhaustive.

With its new administrative commandments and expanding exchanging volume, the Exchange was
continuously turning into an acknowledged piece of the monetary life in the City. Regardless of
nonstop analysis from papers and the general population, the administration utilized the

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Exchange's sorted out market (and would doubtlessly not have overseen without it) to collect the
huge measure of cash required for the wars against Napoleon.

Foreign and regional exchanges

After the war and confronting a blasting world economy, outside loaning to nations, for example,
Brazil, Peru and Chile was a developing business sector. Remarkably, the Foreign Market at the
Exchange took into account dealers and merchants to take part, and the Royal Exchange facilitated
all exchanges where remote gatherings were included. The consistent increment in abroad business
inevitably implied that managing in outside protections must be permitted inside the entirety of
the Exchange's premises.

Similarly as London appreciated development through global exchange, the remainder of Great
Britain additionally profited by the financial blast. Two different urban communities, specifically,
indicated extraordinary business improvement: Liverpool and Manchester. Subsequently, in 1836
both the Manchester and Liverpool stock trades were opened. Some stock costs some of the time
rose by 10%, 20% or even 30% in seven days. These were times when stockbroking was viewed
as a genuine business calling, and such pulled in numerous business people. In any case, with
blasts came busts, and in 1835 the "Spanish frenzy" hit the business sectors, trailed by a second
one two years after the fact.

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3.a Graphical Representation of Selected Stock Market

The Exchange before the World Wars

By June 1853, both taking an interest individuals and representatives were occupying so much
room that the Exchange was currently awkwardly swarmed, and ceaseless extension plans were
occurring. Having just been broadened west, east and northwards, it was then chosen the Exchange
required a whole new foundation. Thomas Allason was selected as the primary designer, and in
March 1854 the new block building enlivened from the Great Exhibition stood prepared. This was
a tremendous improvement in both environmental factors and space, with double the floor space
accessible.

By the late 1800s, the phone, paper feed and the message had been created. Those new innovations
prompted an unrest in crafted by the Exchange.

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First World War

As the money related focal point of the world, both the City and the Stock Exchange were hit hard
by the flare-up of World War I in 1914. Because of fears that acquired cash was to be brought in
and that outside banks would request their credits or raise premium, costs flooded from the start.
The choice to close the Exchange for improved breathing space and to stretch out the August Bank
Holiday to preclude a sudden spike in demand for banks, was rushed through by the board of
trustees and Parliament, separately. The Stock Exchange wound up being shut from the finish of
July until the New Year, making road business be presented again just as the "challenge
framework".

The Exchange was set to open again on 4 January 1915 under monotonous limitations: exchanges
were to be in real money as it were. Because of the confinements and difficulties on exchanging
brought by the war, just about a thousand individuals quit the Exchange somewhere in the range
of 1914 and 1918. At the point when harmony returned in November 1918, the state of mind on
the exchanging floor was by and large cowed. In 1923 the Exchange got its own escutcheon, with
the aphorism Dictum Meum Pactum, My Word is My Bond.

Second World War

In 1937 authorities at the Exchange utilized their encounters from World War I to draw up plans
for how to deal with another war. The primary concerns included air strikes and the resulting
besieging of the Exchange's edges, and one proposal was a transition to Denham,
Buckinghamshire. This anyway never occurred. On the main day of September 1939, the
Exchange shut its entryways "until further notification" and after two days World War II was
proclaimed. Not at all like in the earlier war, the Exchange opened its entryways again six days
after the fact, on 7 September.

As the war swelled into its subsequent year, the worries for air assaults were more noteworthy than
any time in recent memory. In the end, the evening of 29 December 1940 perhaps the best fire in
London's history occurred. The Exchange's floor was hit by a grip of combustible bombs, which
were quenched rapidly. Exchanging on the floor was presently radically low and most was done
via telephone to lessen the chance of wounds.

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The Exchange was just shut for one more day during wartime, in 1945 because of harm from a V-
2 rocket. Regardless exchanging proceeded with the house's cellar.

Post-war
Following quite a while of unsure if not violent occasions, securities exchange business blasted in
the late 1950s. This prodded authorities to discover new, increasingly reasonable convenience.
The work on the new Stock Exchange Tower started in 1967. The Exchange's new 321 feet (96
meter) high structure had 26 stories with committee and organization at the top, and center floors
let out to associate organizations. Sovereign Elizabeth II opened the structure on 8 November
1972; it was another City milestone, with its 23,000 sq ft (2,100 m2) exchanging floor.

1973 denoted a time of changes for the Stock Exchange. Initial, two exchanging forbiddances were
nullified. A report from the Monopolies and Mergers Commission suggested the permission of the
two ladies and remote conceived individuals on the floor. Second, in March the London Stock
Exchange officially converged with the eleven British and Irish provincial trades, including the
Scottish Stock Exchange.[9] This development prompted the production of another situation of
Chief Executive Officer; after a broad hunt this post was given to Robert Fell. There were more
administration changes in 1991, when the administering Council of the Exchange was supplanted
by a Board of Directors drawn from the Exchange's official, client and client base; and the
exchanging name turned into "The London Stock Exchange".

FTSE 100 Index (articulated "Footsie 100") was propelled by a partnership of the Financial Times
and the Stock Exchange on 3 January 1984. This ended up being one of the most valuable records
of all, and followed the developments of the 100 driving organizations recorded on the Exchange.

Occupy London
The Stock Exchange in Paternoster Square was the underlying objective for the nonconformists of
Occupy London on 15 October 2011. Endeavours to involve the square were defeated by police.
Police fixed off the passage to the square as it is private property, a High Court order having
recently been allowed against free to the square.

The dissenters moved close by to consume the space before St Paul's Cathedral. The fights were a
piece of the worldwide Occupy development.

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Extinction Rebellion
On 25 April 2019, the last day of the Extinction Rebellion interruption in London, 13 activists
stuck themselves together in a chain, obstructing the doors of the Stock Exchange. The dissenters
were all later captured on doubt of exasperated trespass.

Eradication Rebellion had said its dissenters would focus on the monetary business "and the
destructive effects of the ... area on the world we live in" and activists additionally blocked
doorways to HM Treasury and the Goldman Sachs office on Fleet Street.

3.10: Australian Stock Exchange

The birthplaces of the ASX go back to the mid-1800s when six separate trades were built up in the
capital urban communities of the British states in Australia – Melbourne, Victoria, (1861), Sydney,
New South Wales (1871), Hobart, Tasmania (1882), Brisbane, Queensland (1884), Adelaide,
South Australia (1887) and Perth, Western Australia (1889).A further trade in Launceston,
Tasmania, converged into the Hobart trade.

In November 1903, the primary interstate gathering was held to harmonize with the Melbourne
Cup. The trades at that point met on a casual premise until 1937 when the Australian Associated
Stock Exchanges (AASE) was built up, with delegates from each trade. After some time, the AASE
built up uniform posting rules, representative standards, and commission rates.

Exchanging was directed by a call framework, where a trade representative called the names of
each organization and specialists offer or offered on each. During the 1960s, this changed to a post
framework. Trade representatives called "chalkies" composed offers and offers in chalk on boards
persistently and recorded exchanges made.

The ASX (Australian Stock Exchange Limited) was framed in 1987 by enactment of the Australian
Parliament which empowered the amalgamation of six free stock trades that in the past worked in
the state capital urban communities. After demutualisation, the ASX was the main trade on the
planet to have its offers cited on its own market. The ASX was recorded on 14 October 1998.On

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7 July 2006 the Australian Stock Exchange converged with SFE Corporation, holding organization
for the Sydney Futures Exchange.

3.11: Tokyo Stock Exchange

The Tokyo Stock Exchange, which is called Tosho or TSE/TYO for short, is a stock trade situated
in Tokyo, Japan. It is the third biggest stock trade on the planet by total market capitalization of
its recorded organizations, and the biggest in Asia. It had 2,292 recorded organizations with a
consolidated market capitalization of US$5.67 trillion as of February 2019.

In July 2012, an arranged merger with the Osaka Securities Exchange was affirmed by the Japan
Fair Trade Commission. The subsequent substance, the Japan Exchange Group (JPX), was
propelled on January 1, 2013.

3.12: Brazilian Stock Exchange :

Established on August 23, 1890 by Emilio Rangel Pestana, the "Bolsa de Valores de São Paulo"
(São Paulo Stock Exchange, in English) has had a long history of administrations gave to the
financial exchange and the Brazilian economy. Until the mid-1960s, Bovespa and the other
Brazilian financial exchanges were state-possessed organizations, attached with the Secretary of
Finances of the states they had a place with, and intermediaries were selected by the legislature.

After the changes of the national monetary framework and the financial exchange executed in
1965/1966, Brazilian securities exchanges expected a progressively institutional job. In 2007, the
Exchange demutualized and turned into a revenue driven organization.

Through self-guideline, Bovespa works under the management of the Comissão de Valores
Mobiliários (CVM), practically equivalent to the American SEC. Since the 1960s, it has
continually developed with the assistance of innovation, for example, the presentation of PC based
frameworks, cell phones and the web. In 1972, Bovespa was the primary Brazilian securities
exchange to execute a mechanized framework for the spread of data on the web and continuously,
through a plentiful system of work stations.
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Toward the finish of the 1970s, Bovespa additionally presented a phone exchanging framework
Brazil; the "Sistema Privado de Operações por Telefone" or "SPOT" (Private System of Telephone
Trading, in English). Simultaneously, Bovespa built up an arrangement of fungible supervision
and online administrations for financier firms.

In 1990, the exchanges through the Sistema de Negociação Electrônica - CATS (Computer
Assisted Trading System) was all the while worked with the conventional arrangement of "Pregão
Viva Voz" (open objection). As of now, BM&FBOVESPA is a completely electronic trade.

In 1997, another arrangement of electronic exchanging, known as the Mega Bolsa, was executed
effectively. The Mega Bolsa expands the possible volume of handling of data and permits the
Exchange to build its general volume of exercises.

With the objective to increment well known access to the financial exchanges, Bovespa presented
in 1999 the "Home Broker", a web based exchanging frameworks that permits singular speculators
to exchange stocks. The framework empowers clients to execute purchase and sell orders on the
web.

In 2000, Bovespa made three new posting sections, the Novo Mercado (New Market), Level 2 and
Level 1 of Corporate Governance Standards, permitting organizations to agree deliberately to
additionally requesting exposure, administration and consistence commitments. The new posting
portions for the most part moped until 2004, when a developing number of recently open
organizations started to list on the Novo Mercado and different sections as a major aspect of a
capital-raising exertion. From 2004 to 2010, most by far of new postings on the Bovespa were
made by Novo Mercado, Level 2 and Level 1 organizations. The Novo Mercado, Level 2 and
Level 1 sections depend on a legally binding understanding of the recorded organization, its
controlling investor, and its administration to agree to indicated guidelines. What's more, recorded
organizations must submit to discretion as a strategy for settling debates. The arrangement of
assurances involved by a Novo Mercado posting is clearly esteemed by advertise members to build
the allure of organizations. The financial exchange record of Novo Mercado recorded
organizations (the IGC) has reliably outflanked the more extensive Ibovespa file since its dispatch.

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The ongoing achievement of the Brazilian value capital markets is ascribed to a noteworthy degree
to the validity induced by the Novo Mercado guidelines. In 2007, just the United States and China
value markets had a more noteworthy number of starting open contributions. The accessibility of
an "advertise exit" has likewise energized the advancement of a private value industry, a
developing Brazilian speculation banking market and a flourishing resource the executives
business. Another side advantage of a flourishing value showcase has been access to value
financing for the worldwide development of Brazilian business. Brazilian global organizations
have utilized the returns of value contributions to finance a developing number of universal
acquisitions. Vale, Embraer, Gerdau, Brazil Foods, Marfrig Alimentos and JBS have gained
organizations outside Brazil utilizing the returns from value offerings. Attractive valuations of
Brazilian auxiliaries have driven worldwide organizations to list their Brazilian auxiliaries, just
like the instance of Banco Santander Brazil.

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3.12 Tabular Representation of World Stock Market (Based on Capitalisation)

SL No. Country Market Capitalisation

1 India 2,030

2 United States of America 22,923

3 United Kingdom 4,590

4 Netherland 1100

5 Hong Kong 3,936

6 China 4,026

7 Japan 5,679

8 Brazil 938

9 Switzerland 1,523

10 Australia 1,328

11 Germany 1,864

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CHAPTER 4
DATA ANALYSIS AND INTERPRETATION

4.1 Normality Test

Ho : The Errors are Normally Distributed
H1: The Errors are not Normally Distributed
Table and Graph no: 4.1.1- Testing of Normality by using Jarque-Bera Test.

40
Series: INDIA
35 Sample 2000M01 2020M05
Observations 245
30
Mean 5271.677
25 Median 5165.900
Maximum 12168.45
20 Minimum 913.8500
Std. Dev. 3297.426
15 Skewness 0.390168
Kurtosis 2.055045
10
Jarque-Bera 15.33152
5 Probability 0.000469

0
2000 4000 6000 8000 10000 12000

Inference : The above Graphic Table reveals the information of Descriptive and the average Index
point of Nifty for a period of 20 years is 5271 with respective Standard Deviation is 3297. The
errors are slighted positively skewed and it is Platykurtic since the kurtosis value is less than 3.
The JB value is 15.33 with respective probability value <0.01. Since the ‘p’ value is less than
significant value of 0.05 it rejects the null hypothesis i.e. the data set selected for the study is not
normally distributed.

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Table:4.1.2 – Descriptive Statistics

AUSTR BOVE GER HONGK LOND NETHR SHAN SWIS TOKY

ALIA SPA MAN ONG ON LND NY GEI S O
4738.4 4876 7540. 19803. 5893. 432.02 8680. 2458. 7399. 1440
Mean 06 0.56 394 27 078 59 717 282 363 0.34
5232. 6898. 20815. 5964. 2373. 7593. 1384
Median 4837.9 4 21 09 6 431.28 8251 213 67 3.55

Maximu 1156 1324 32887. 7748. 1391 5954. 1062 2412

m 7017.2 45 9.01 27 8 689.52 3.03 765 7.88 0.04

Minimu 2423. 8634.4 3567. 4617. 1060. 4085. 7568.

m 2800.9 8623 87 5 4 216.98 03 738 6 42
Std. 1080.9 2485 2921. 5770.0 1013. 107.43 2343. 874.3 1495. 4496.
Dev. 84 8.38 529 25 058 27 584 375 161 112
- - - -
Skewne 0.0675 0.213 0.381 0.1353 0.290 0.2696 0.338 0.849 0.078 0.353
ss 01 789 39 8 18 98 793 58 1 767
1.9235 2.561 2.015 2.0912 2.292 2.2571 2.070 4.292 2.003 1.902
Kurtosis 71 439 349 95 563 53 988 621 524 927
Jarque- 12.014 3.829 15.83 9.1778 8.547 8.6032 13.49 46.52 10.38 17.39
Bera 45 751 691 29 252 67 732 97 555 677

Probabil0.0024 0.147 0.000 0.0101 0.013 0.0135 0.001 0.005 0.000

ity 61 36 364 64 931 46 172 0 557 167
11609 1194 1847 485180 1443 10584 2126 6022 1812 3528
Sum 09 6338 396 2 804 6.3 776 79 844 083
Sum Sq. 2.85E+ 1.51E 2.08E 8.12E+ 2.50E 28161 1.34E 1.87E 5.45E 4.93E
Dev. 08 +11 +09 09 +08 97 +09 +08 +08 +09

Observa
tions 245 245 245 245 245 245 245 245 245 245

Inference:

• The indicated table shows the Descriptive Statistics for a period of 20 years.
• The Average of Australia is 4738.406. The standard Deviation is 1080.984. It is observed
that it is platykurtic with respect to the errors. The Null hypothesis can be rejected since
the ‘p’ value is <0.05. Therefore, it can be concluded that the collected data is suitable for
the research since it is normally distributed.

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• For the observed 245 data of Brazil Index the mean is 48760.56. The risk associated with
the same is 24858.38. The distribution is not normally distributed since the ‘p’ value is
greater than >0.05.
• The data of German Index is suited for this research purpose since ‘p’ value is <0.05 it
rejects the Null Hypothesis hence it is Normally Distributed and Teptokurtic. The mean
and Standard Deviation results for the same are 7540.394 and 2921.529 respectively.
• It is observed that the Hong Kong Index data is suitable for the taken-up study since the
Null hypothesis is rejected. It can also be concluded that the data are Normally distributed
and Platykurtic. The average of the Index for the last 20 years has been 19803.17 and the
Standard Deviation is 770.
• With respect to the London Stock Index it is observed that the average and the associated
risk is 5893.078 and 1013.08. The Null hypothesis can be accepted as the suggested ‘p’
value is <0.05 and platykurtic making the data Normally distributed.
• The Netherland Stock Index shows that the risk and the average of the overall Index is
170.43 and 432.02 respectively. With the observation of the table it is evident that the
probability value Is <0.05. This assures with the rejection of Null Hypothesis and making
the data suitable for the research. However, it can also be observed that the data is
platykurtic in Nature.
• The Average of the New York Stock Exchange is 8680.7 and the standard Deviation is
2343.58. The ‘p’ value is <0.05 and the kurtosis value is <3. Thus, the Null hypothesis is
rejected and the data is Normally Distributed.
• The Null hypothesis of the Shanghai is rejected since the suggested ‘p’ value is <0.05 and
the data is Normally Distributed. However, it is observed that the mean value of the same
is 2458.28 and the risk is 874.33. The data is Teptokurtic in nature.
• The descriptive statistics suggests that the mean of the Switzerland is 7399.63 and the
standard deviation value of 1495.16. The probability value of the index is <0.05 making it
rejecting the Null Hypothesis. The Data is normally distributed and platykurtic.
• The mean and Standard Deviation scores with respect to the Tokyo stock Index is 14400.30
and 4496.11 respectively. The probability value is less than 0.05 making the data normally
distributed and rejecting Null Hypothesis. The calculations also show that the data is
platykurtic since the kurtosis value is <3.

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INDIA NY LONDON NETHRLND
40 16 30 40

25
30 12 30
20
Frequency

Frequency

Frequency

Frequency
20 8 15 20

10
10 4 10
5

0 0 0 0
0 2,000 4,000 6,000 8,000 10,000 12,000 14,000 4,000 5,000 6,000 7,000 8,000 9,000 10,000 12,000 14,000 3,500 4,000 4,500 5,000 5,500 6,000 6,500 7,000 7,500 8,000 200 300 400 500 600 700

SHANGEI SWISS TOKYO HONGKONG

40 25 20 30

25
20 16
30
20
Frequency

Frequency

Frequency

Frequency
15 12
20 15
10 8
10
10
5 4
5

0 0 0 0
1,000 2,000 3,000 4,000 5,000 6,000 4,000 5,000 6,000 7,000 8,000 9,000 10,000 11,000 6,000 8,000 10,000 14,000 18,000 22,000 26,000 8,000 12,000 16,000 20,000 24,000 28,000 32,000 36,000

GERMAN BOVESPA AUSTRALIA

25 40 30

25
20
30
20
Frequency

Frequency

Frequency
15
20 15
10
10
10
5
5

0 0 0
2,000 4,000 6,000 8,000 10,000 12,000 14,000 0 20,000 40,000 60,000 80,000 100,000 120,000 2,500 3,000 3,500 4,000 4,500 5,000 5,500 6,000 6,500 7,000 7,500

4.2 Stationary Test

H0: The data are non-stationary (Unit Root Problem)
H1:: The data are Stationary (No- Unit Root Problem)

Table 4.2.1 Unit Root Test

Null Hypothesis: INDIA has a unit root

Exogenous: Constant

Lag Length: 0 (Automatic - based on SIC, maxlag=15)

t-Statistic Prob.*

Augmented Dickey-Fuller test statistic -0.70314 0.8427

Test critical values: 1% level -3.457061

5% level -2.87319

10% level -2.573054

*MacKinnon (1996) one-sided p-values.

Inference: The above table is the calculation of Unit Root Test. Here used ADF test to find out
the data set is stationary or not. Based on the result t statistic value is 0.7031 with respective

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probability value is 0.8427. Since p value is > than significance value of 0.05 it accepts the null
hypothesis. Therefore, data has Unit Root Problem or Data is Non stationary. To calculate further
Regression analysis, we need to convert Non-stationary to Stationary here researcher identified
the first lag of selected variables in the following table.

Table No:4.2.2 Stationary Test of Selected Variables at Level and 1st difference.

Variable At Level At 1st Difference.

T Statistic P Value H0 T P Value H0
Statistic
India 0.703 0.8427 Accept 16.34 <0.01 Reject.
USA 1.146 0.6976 Accept 15.08 <0.01 Reject.
LONDON 1.739 0.4101 Accept 15.75 <0.01 Reject.
JAPAN 1.275 0.6414 Accept 14.55 <0.01 Reject.
HONG KONG 1.632 0.4643 Accept 15.11 <0.01 Reject.

GERMAN 0.792 0.8192 Accept 14.67 <0.01 Reject.

CHINA 2.670 0.0807 Accept 8.86 <0.01 Reject.
AUSTRALIA 1.746 0.4065 Accept 14.65 <0.01 Reject.
BRAZIL 1.142 0.6991 Accept 13.91 <0.01 Reject.
NETHERLANDS 1.936 0.315 Accept 14.75 <0.01 Reject.
SWITZERLAND -1.004 0.752 Accept 13.67 <0.01 Reject.

Inference: From the above table it is identified that all the selected variables are Non-Stationary
or has a Unit Root Problem at Level; and it is Stationary at First difference. Here Used ADF Test
to find out Stationarity. Based on the above Information the researcher here converted all the
Indices value (points) into Log Return because to bring it into stationary.

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4.3 Auto Correlation Test or Serial Correlation.

H0: There is no Auto Correlation

H1 : There is Auto Correlation

Breusch-Godfrey Serial Correlation LM Test:

F-statistic 139.4066 Prob. F(2,232) 0
Obs*R-squared 133.7265 Prob. Chi-Square(2) 0
Test Equation:
Dependent Variable: RESID
Method: Least Squares
Sample: 2000M01 2020M05
Included observations: 245
Presample missing value lagged residuals set to zero.
Variable Coefficient Std. Error t-Statistic Prob.
JAPAN 0.00 0.02 -0.19 0.85
LONDON -0.05 0.09 -0.52 0.61
HONGKONG 0.02 0.02 1.27 0.21
GERMAN 0.01 0.04 0.28 0.78
CHINA -0.04 0.05 -0.85 0.40
AUSTRALIA 0.04 0.09 0.40 0.69
BRAZIL 0.00 0.00 -1.19 0.23
NETHRLND 0.09 0.57 0.17 0.87
SWISS 0.01 0.05 0.15 0.88
USA -0.03 0.05 -0.48 0.63
C 42.41 197.00 0.22 0.83
RESID(-1) 0.7585 0.0660 11.4879 0
RESID(-2) -0.0193 0.0674 -0.2866 0.7747
R-squared 0.545822 Mean dependent var -2.38E-12
Adjusted R-squared 0.52233 S.D. dependent var 416.7222
S.E. of regression 288.0119 Akaike info criterion 14.21548
Sum squared resid 19244602 Schwarz criterion 14.40126
Log likelihood -1728.397 Hannan-Quinn criter. 14.2903
F-statistic 23.23444 Durbin-Watson stat 1.971568
Prob(F-statistic) 0

Inference: The above table reveals that Auto Correlation Test and identifies that p value is <
0.01 hence it rejects the Null Hypothesis i.e. the selected variables are having Auto Correlation
and Durbin Watson Statistic value is1.97 which is near to 2. Hence it is indicates that the model is
very much appropriate.

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4.4 Heteroskedasticity Test

H0: The selected variables are Homoskedasticity

H1: The selected variables are Heteroskedasticity

Table 4.4.1: Heteroskedasticity Test: Breusch-Pagan-Godfrey

Breusch-Godfrey Serial Correlation LM Test:

F-statistic 139.4066 Prob. F (2,232) 0
Obs*R-squared 133.7265 Prob. Chi-Square (2) 0
Test Equation:
Dependent Variable: RESID
Method: Least Squares
Sample: 2000M01 2020M05
Included observations: 245
Presample missing value lagged residuals set to zero.
Variable Coefficient Std. Error t-Statistic Prob.
JAPAN 0.00 0.02 -0.19 0.85
LONDON -0.05 0.09 -0.52 0.61
HONGKONG 0.02 0.02 1.27 0.21
GERMAN 0.01 0.04 0.28 0.78
CHINA -0.04 0.05 -0.85 0.40
AUSTRALIA 0.04 0.09 0.40 0.69
BRAZIL 0.00 0.00 -1.19 0.23
NETHRLND 0.09 0.57 0.17 0.87
SWISS 0.01 0.05 0.15 0.88
USA -0.03 0.05 -0.48 0.63
C 42.41 197.00 0.22 0.83
RESID(-1) 0.7585 0.0660 11.4879 0
RESID(-2) -0.0193 0.0674 -0.2866 0.7747
R-squared 0.545822 Mean dependent var -2.38E-12
Adjusted R-squared 0.52233 S.D. dependent var 416.7222
S.E. of regression 288.0119 Akaike info criterion 14.21548
Sum squared resid 19244602 Schwarz criterion 14.40126
Log likelihood -1728.397 Hannan-Quinn criter. 14.2903
F-statistic 23.23444 Durbin-Watson stat 1.971568
Prob(F-statistic) 0

Inference: The above table reveals that Heteroskedasticity Test and identifies that p value is
< 0.01 hence it rejects the Null Hypothesis i.e. the selected variables are Heteroskedasticity and
Durbin Watson Statistic value is1.44 which is near to 2. Hence it is indicating that the model is
very much appropriate.
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4.5 Multi-collinearity Test

H0: The selected variables are positively correlated.

H1: The selected variables are not positively correlated.

Table 4.5.1: Multi Collinearity Test

LR LRS LRC
LRIN US WIS LRGER LRNET LRHON HIN LRLON LRAUST LRJA LRBR
DIA A S MAN HRLND GKONG A DON RALIA PAN AZIL

LRINDIA 1

LRUSA 0.60 1
0.7
LRSWISS 0.45 3 1
LRGERM 0.7
AN 0.55 9 0.75 1
LRNETH 0.7
RLND 0.56 8 0.79 0.88 1
LRHON 0.7
GKONG 0.64 2 0.52 0.63 0.63 1
LRCHIN 0.3
A 0.31 6 0.26 0.30 0.29 0.53 1
LRLOND 0.8
ON 0.56 4 0.73 0.80 0.83 0.66 0.27 1
LRAUST 0.7
RALIA 0.60 6 0.61 0.66 0.68 0.60 0.32 0.73 1
LRJAPA 0.6
N 0.56 6 0.57 0.61 0.62 0.59 0.33 0.59 0.60 1
LRBRAZI 0.6
L 0.60 9 0.47 0.58 0.59 0.67 0.35 0.63 0.61 0.46 1

Inference: From the above table of Multicollinearity Test it is identified that there is of all the
selected variables are positively correlated. However, the following countries are Highly
Positively Correlated such as Netherlands with Switzerland and Germany and London with
Netherlands, USA and Germany. Here considered more than 0.8 as highly positively correlated.

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This Multicollinearity test helps for conducting Multi-Regression Analysis to avoid such highly
positively correlated variables.

4.6 – Multiple-Regression Analysis.

H0: There is no Significant impact of World Stock Market to Indian Stock Market.
H1: There is Significant impact of World Stock Market to Indian Stock Market.

Table 4.6.1 – Multiple Regression Analysis (Excluding Switzerland, Germany, London)

Dependent Variable: LRINDIA

Method: Least Squares
Sample (adjusted): 2000M02 2020M05
Included observations: 244 after adjustments
Variable Coefficient Std. Error t-Statistic Prob.
LRAUSTRALIA 0.35 0.12 2.82 0.01
LRBRAZIL 0.21 0.06 3.36 0.00
LRCHINA -0.04 0.05 -0.79 0.43
LRHONGKONG 0.34 0.09 3.94 0.00
LRJAPAN 0.22 0.08 2.89 0.00
LRNETHRLND 0.07 0.09 0.72 0.47
LRUSA -0.11 0.14 -0.76 0.45
C 0.50 0.31 1.62 0.11
R-squared 0.53 Mean dependent var 0.75
Adjusted R-squared 0.51 S.D. dependent var 6.80
S.E. of regression 4.74 Akaike info criterion 5.98
Sum squared resid 5292.82 Schwarz criterion 6.10
Log likelihood -721.61 Hannan-Quinn criter. 6.03
F-statistic 37.77 Durbin-Watson stat 2.21
Prob(F-statistic) 0.00

Estimate Equation:

LR India = 𝛽1 ∗ 𝐿𝑅 𝐴𝑢𝑠𝑡𝑟𝑎𝑙𝑖𝑎 + 𝛽2 ∗ 𝐿𝑅 𝐵𝑟𝑎𝑧𝑖𝑙 + 𝛽3 ∗ 𝐿𝑅 𝐶ℎ𝑖𝑛𝑎 + 𝛽4 ∗ 𝐿𝑅 𝐻𝑜𝑛𝑔𝐾𝑜𝑛𝑔 + 𝛽5

∗ 𝐿𝑅 𝐽𝑎𝑝𝑎𝑛 + 𝛽6 ∗ 𝐿𝑅 𝑁𝑒𝑡ℎ𝑒𝑟𝑙𝑎𝑛𝑑 + 𝛽7 ∗ 𝐿𝑅 𝑈𝑆𝐴 + 𝛼

Inference: From the above Multiple Regression Analysis here assumed that India is a dependent
variable and World Stock Indices are Independent are Variables. Based on the Multiple Regression
Analysis Australia Brazil Hongkong and Japan does have Impact on Indian Stock Market since
the ‘p’ value is less than significant value of 0.05 therefore, it rejects Null Hypothesis and the
following three World Stock Market does not impact on Indian Stock market i.e. USA Netherland
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and China because it Accepts Null Hypothesis. However, researcher ignored Switzerland UK and
Germany because of Multi-Collinearity problem, it also accepts the model because of Durbin-
Watson statistics value is 2.21.
The highest effect of the chosen lot is of Australia and Hong Kong while the least lies with China.
The constant Alpha is of 0.50 for the above combination.

Table 4.6.2- Multiple Regression Analysis (Excluding USA, Switzerland, Germany and London)

Dependent Variable: LRINDIA

Method: Least Squares
Sample (adjusted): 2000M02 2020M05
Included observations: 244 after adjustments
Variable Coefficient Std. Error t-Statistic Prob.
LRAUSTRALIA 0.317387 0.116774 2.717956 0.0071
LRBRAZIL 0.197426 0.060303 3.273893 0.0012
LRCHINA -0.036477 0.047515 -0.767705 0.4434
LRHONGKONG 0.325968 0.084203 3.871212 0.0001
LRJAPAN 0.209249 0.074841 2.795926 0.0056
LRNETHRLND 0.039781 0.086091 0.462081 0.6444
C 0.487443 0.305715 1.594438 0.1122
R-squared 0.527224 Mean dependent var 0.747504
Adjusted R-squared 0.515255 S.D. dependent var 6.79595
S.E. of regression 4.731585 Akaike info criterion 5.974666
Sum squared resid 5305.931 Schwarz criterion 6.074995
Log likelihood -721.9093 Hannan-Quinn criter. 6.015073
F-statistic 44.04916 Durbin-Watson stat 2.218893
Prob(F-statistic) 0

Estimate Equation:

LR India = 𝛽1 ∗ 𝐿𝑅 𝐴𝑢𝑠𝑡𝑟𝑎𝑙𝑖𝑎 + 𝛽2 ∗ 𝐿𝑅 𝐵𝑟𝑎𝑧𝑖𝑙 + 𝛽3 ∗ 𝐿𝑅 𝐶ℎ𝑖𝑛𝑎 + 𝛽4 ∗ 𝐿𝑅 𝐻𝑜𝑛𝑔𝐾𝑜𝑛𝑔 + 𝛽5

∗ 𝐿𝑅 𝐽𝑎𝑝𝑎𝑛 + 𝛽6 ∗ 𝐿𝑅 𝑁𝑒𝑡ℎ𝑒𝑟𝑙𝑎𝑛𝑑 + 𝛽7 + 𝛼

Inference: From the over Multiple Regression Analysis here expected that India is a needy
variable and World Stock Indices are Independent are Variables. In light of the Multiple
Regression Analysis Australia Brazil Hongkong and Japan has Impact on Indian Stock Market
since the 'p' esteem is not exactly critical estimation of 0.05 in this manner, it rejects Null
Hypothesis and the accompanying three World Stock Market doesn't affect on Indian Stock market
for example China and Netherlands since it Accepts Null Hypothesis. Notwithstanding, scientist
disregarded USA Switzerland Germany and London as a result of Multi-Collinearity issue, it
additionally acknowledges the model in view of Durbin-Watson measurements esteem is 2.21.
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The most elevated impact of the picked part is of Australia and Hong Kong while minimal lies
with China. The steady Alpha is of 0.48 for the above mix.

Table 4.6.3 Multiple Regression Analysis (Excluding USA, Germany and Netherlands)

Dependent Variable: LRINDIA

Method: Least Squares
Sample (adjusted): 2000M02 2020M05
Included observations: 244 after adjustments
Variable Coefficient Std. Error t-Statistic Prob.
LRAUSTRALIA 0.351909 0.122398 2.87513 0.0044
LRBRAZIL 0.202425 0.060867 3.32569 0.001
LRCHINA -0.038642 0.048051 -0.80419 0.4221
LRHONGKONG 0.337836 0.08577 3.938841 0.0001
LRJAPAN 0.228795 0.075095 3.046744 0.0026
LRLONDON 0.008646 0.142832 0.060535 0.9518
LRSWISS -0.05873 0.119738 -0.49049 0.6242
C 0.479768 0.306836 1.5636 0.1193
R-squared 0.527349 Mean dependent var 0.747504
Adjusted R-squared 0.51333 S.D. dependent var 6.79595
S.E. of regression 4.740974 Akaike info criterion 5.9826
Sum squared resid 5304.532 Schwarz criterion 6.097261
Log likelihood -721.8771 Hannan-Quinn criter. 6.028779
F-statistic 37.61592 Durbin-Watson stat 2.226702
Prob(F-statistic) 0

Estimate Equation:

LR India = 𝛽1 ∗ 𝐿𝑅 𝐴𝑢𝑠𝑡𝑟𝑎𝑙𝑖𝑎 + 𝛽2 ∗ 𝐿𝑅 𝐵𝑟𝑎𝑧𝑖𝑙 + 𝛽3 ∗ 𝐿𝑅 𝐶ℎ𝑖𝑛𝑎 + 𝛽4 ∗ 𝐿𝑅 𝐻𝑜𝑛𝑔𝐾𝑜𝑛𝑔 + 𝛽5

∗ 𝐿𝑅 𝐽𝑎𝑝𝑎𝑛 + 𝛽6 ∗ 𝐿𝑅 𝑁𝑒𝑡ℎ𝑒𝑟𝑙𝑎𝑛𝑑 + 𝛽7 𝑆𝑤𝑖𝑡𝑧𝑒𝑟𝑙𝑎𝑛𝑑 + 𝛼

Inference: From the over Multiple Regression Analysis here expected that India is a needy
variable and World Stock Indices are Independent are Variables. In view of the Multiple
Regression Analysis Australia Brazil Hongkong and Japan has Impact on Indian Stock Market
since the 'p' esteem is not exactly huge estimation of 0.05 thusly, it rejects Null Hypothesis and
the accompanying World Stock Market doesn't affect on Indian Stock market for example China
London and Switzerland since it Accepts Null Hypothesis. In any case, analyst overlooked USA
Germany and Netherlands as a result of Multi-Collinearity issue, it likewise acknowledges the
model in view of Durbin-Watson measurements esteem is 2.22.
The most noteworthy impact of the picked parcel is of Australia and Hong Kong while minimal
lies with China. The steady Alpha is of 0.47 for the above blend.

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Table 4.6.4 Multiple Regression Analysis (Excluding Netherlands and London)

Dependent Variable: LRINDIA

Method: Least Squares
Sample (adjusted): 2000M02 2020M05
Included observations: 244 after adjustments
Variable Coefficient Std. Error t-Statistic Prob.

LRAUSTRALIA 0.359848 0.123537 2.912864 0.0039

LRBRAZIL 0.204337 0.062694 3.259244 0.0013
LRCHINA -0.038005 0.047555 -0.799181 0.425
LRHONGKONG 0.337532 0.086655 3.895141 0.0001
LRJAPAN 0.226495 0.076505 2.960528 0.0034
LRSWISS -0.087968 0.129932 -0.677027 0.4991
LRGERMAN 0.086209 0.091667 0.940454 0.348
LRUSA -0.083937 0.150883 -0.556307 0.5785
C 0.482349 0.305446 1.579162 0.1156
R-squared 0.529325 Mean dependent var 0.747504
Adjusted R-squared 0.513302 S.D. dependent var 6.79595
S.E. of regression 4.741109 Akaike info criterion 5.986607
Sum squared resid 5282.356 Schwarz criterion 6.115601
Log likelihood -721.366 Hannan-Quinn criter. 6.038559
F-statistic 33.03538 Durbin-Watson stat 2.218689
Prob(F-statistic) 0

Estimate Equation:

LR India = 𝛽1 ∗ 𝐿𝑅 𝐴𝑢𝑠𝑡𝑟𝑎𝑙𝑖𝑎 + 𝛽2 ∗ 𝐿𝑅 𝐵𝑟𝑎𝑧𝑖𝑙 + 𝛽3 ∗ 𝐿𝑅 𝐶ℎ𝑖𝑛𝑎 + 𝛽4 ∗ 𝐿𝑅 𝐻𝑜𝑛𝑔𝐾𝑜𝑛𝑔 + 𝛽5

∗ 𝐿𝑅 𝐽𝑎𝑝𝑎𝑛 + 𝛽6 ∗ 𝐿𝑅 𝐺𝑒𝑟𝑚𝑎𝑛 + 𝛽7 𝑆𝑤𝑖𝑡𝑧𝑒𝑟𝑙𝑎𝑛𝑑 + 𝛽7 𝐺𝑒𝑟𝑚𝑎𝑛𝑦 + 𝛼

Inference: From the over Multiple Regression Analysis here expected that India is a destitute
variable and World Stock Indices are Independent are Variables. Considering the Multiple
Regression Analysis Australia Brazil Hongkong and Japan has Impact on Indian Stock Market
since the ‘p’ regard isn’t actually tremendous estimation of 0.05 in this manner, it rejects Null
Hypothesis and the going with World Stock Market doesn’t influence on Indian Stock market for
instance China Switzerland Germany and USA since it Accepts Null Hypothesis. Regardless,
examiner neglected Netherlands and London because of Multi-Collinearity issue, it similarly
recognizes the model taking into account Durbin-Watson estimations regard is 2.21.
The most noteworthy impact of the picked parcel is of Australia and Hong Kong while minimal
lies with China. The steady Alpha is of 0.48 for the above blend.
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4.7 Correlation

Table 4.7.1 Correlation Matrix.

LR LRS LRC
LRIN US WIS LRGER LRNET LRHON HIN LRLON LRAUST LRJA LRBR
DIA A S MAN HRLND GKONG A DON RALIA PAN AZIL
LRINDIA 1
LRUSA 0.60 1
0.7
LRSWISS 0.45 3 1
LRGERM 0.7
AN 0.55 9 0.75 1
LRNETH 0.7
RLND 0.56 8 0.79 0.88 1
LRHON 0.7
GKONG 0.64 2 0.52 0.63 0.63 1
LRCHIN 0.3
A 0.31 6 0.26 0.30 0.29 0.53 1
LRLOND 0.8
ON 0.56 4 0.73 0.80 0.83 0.66 0.27 1
LRAUST 0.7
RALIA 0.60 6 0.61 0.66 0.68 0.60 0.32 0.73 1
LRJAPA 0.6
N 0.56 6 0.57 0.61 0.62 0.59 0.33 0.59 0.60 1
LRBRAZI 0.6
L 0.60 9 0.47 0.58 0.59 0.67 0.35 0.63 0.61 0.46 1

Inference: The above table shows the Correlation between the stock Indices. There exists high
correlation between London USA Germany and Netherlands, Netherlands with Switzerland and
Germany. The least correlation with respect to the selected Indices lies with China with other
selected major Indices.

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4.8 Granger Causality Test

Table 4.8.1 VAR Model

VAR Lag Order Selection Criteria

Endogenous variables: LRINDIA LRAUSTRALIA LRBRAZIL LRCHINA LRHONGKONG LRJAPAN
LRNETHRLND LRGERMAN LRLONDON LRSWISS LRUSA
Exogenous variables: C
Sample: 2000M01 2020M05
Included observations: 236

Lag LogL LR FPE AIC SC HQ

0 -6895.53 NA 7.28e+11* 58.52993* 58.69138* 58.59502*
1 -6805.49 170.9365 9.47E+11 58.79225 60.72965 59.57323
2 -6732.37 131.9844 1.43E+12 59.19803 62.91137 60.69491
3 -6655.75 131.158 2.11E+12 59.57415 65.06345 61.78694
4 -6547.69 174.9103* 2.43E+12 59.68382 66.94906 62.6125
5 -6466.97 123.1311 3.59E+12 60.02518 69.06637 63.66976
6 -6381.39 122.5634 5.23E+12 60.32538 71.14251 64.68586
7 -6287.2 126.129 7.30E+12 60.55251 73.1456 65.6289
8 -6193.03 117.3129 1.06E+13 60.77989 75.14892 66.57217
* indicates lag order selected by the criterion
LR: sequential modified LR test statistic (each test at 5% level)
FPE: Final prediction error
AIC: Akaike information criterion
SC: Schwarz information criterion
HQ: Hannan-Quinn information criterion

Inference: The above table of Vector Autoregression Model suggests the researcher to opt for
‘0’ lag as per FPE, AIC,SC and HQ Model.

Note: Zero Lag does not take in pairwise Granger Causality hence researcher considered
here Lag-1 for further calculation.

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Table 4.8.2 – Multiple Regression Analysis (Excluding Switzerland, Germany, London)

VAR Lag Order Selection Criteria

Endogenous variables: LRINDIA LRAUSTRALIA LRBRAZIL LRCHINA LRHONGKONG LRJAPAN LRNETHRLND LRUSA
Exogenous variables: C
Sample: 2000M01 2020M05
Included observations: 236
Lag LogL LR FPE AIC SC HQ
0 -5345.4 NA 6.97e+09* 45.36776* 45.48518* 45.41509*
1 -5298.72 89.78645* 8.07E+09 45.5146 46.57136 45.94059
2 -5265.04 62.51645 1.05E+10 45.77151 47.76761 46.57615
3 -5231.22 60.47295 1.36E+10 46.02728 48.96273 47.21058
4 -5184.37 80.59787 1.58E+10 46.17262 50.04741 47.73458
5 -5141.38 71.03842 1.92E+10 46.35069 51.16483 48.29131
6 -5096.97 70.38091 2.31E+10 46.51669 52.27018 48.83597
7 -5061.01 54.55569 3.01E+10 46.75429 53.44711 49.45222
8 -5005.39 80.59103 3.36E+10 46.82537 54.45754 49.90196
* indicates lag order selected by the criterion
LR: sequential modified LR test statistic (each test at 5% level)
FPE: Final prediction error
AIC: Akaike information criterion
SC: Schwarz information criterion
HQ: Hannan-Quinn information criterion

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Table 4.8.3 Multiple Regression Analysis (Excluding USA, Switzerland, Germany and London)

VAR Lag Order Selection Criteria

Endogenous variables: LRINDIA LRAUSTRALIA LRBRAZIL LRCHINA LRHONGKONG LRJAPAN LRNETHRLND LRUSA

Exogenous variables: C
Sample: 2000M01 2020M05
Included observations: 236

Lag LogL LR FPE AIC SC HQ

0 -5345.4 NA 6.97e+09* 45.36776* 45.48518* 45.41509*
1 -5298.72 89.78645* 8.07E+09 45.5146 46.57136 45.94059
2 -5265.04 62.51645 1.05E+10 45.77151 47.76761 46.57615
3 -5231.22 60.47295 1.36E+10 46.02728 48.96273 47.21058
4 -5184.37 80.59787 1.58E+10 46.17262 50.04741 47.73458
5 -5141.38 71.03842 1.92E+10 46.35069 51.16483 48.29131
6 -5096.97 70.38091 2.31E+10 46.51669 52.27018 48.83597
7 -5061.01 54.55569 3.01E+10 46.75429 53.44711 49.45222
8 -5005.39 80.59103 3.36E+10 46.82537 54.45754 49.90196
* indicates lag order selected by the criterion
LR: sequential modified LR test statistic (each test at 5% level)
FPE: Final prediction error
AIC: Akaike information criterion
SC: Schwarz information criterion
HQ: Hannan-Quinn information criterion

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Table 4.8.4 Multiple Regression Analysis (Excluding USA, Germany and Netherlands)

VAR Lag Order Selection Criteria

Endogenous variables: LRINDIA LRAUSTRALIA LRBRAZIL LRCHINA LRHONGKONG LRJAPAN
LRNETHRLND
Exogenous variables: C
Sample: 2000M01 2020M05
Included observations: 236

Lag LogL LR FPE AIC SC HQ

0 -4855.73 NA 1.86e+09* 41.20959* 41.31233* 41.25100*

1 -4820.71 67.66018* 2.10E+09 41.32809 42.15001 41.65941
2 -4795.13 47.91162 2.56E+09 41.52655 43.06766 42.14778
3 -4769.33 46.79106 3.12E+09 41.72315 43.98345 42.6343
4 -4735.13 59.99651 3.56E+09 41.84857 44.82805 43.04962
5 -4703.15 54.20462 4.14E+09 41.9928 45.69147 43.48376
6 -4673.57 48.37717 4.94E+09 42.15739 46.57525 43.93827
7 -4646.22 43.11107 6.04E+09 42.34087 47.47791 44.41165
8 -4604.66 63.04186 6.58E+09 42.40393 48.26016 44.76463

* indicates lag order selected by the criterion

LR: sequential modified LR test statistic (each test at 5% level)
FPE: Final prediction error
AIC: Akaike information criterion
SC: Schwarz information criterion
HQ: Hannan-Quinn information criterion

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Table 4.8.5 Multiple Regression Analysis (Excluding Netherlands and London)

VAR Lag Order Selection Criteria

Endogenous variables: LRINDIA LRAUSTRALIA LRBRAZIL LRCHINA LRHONGKONG LRJAPAN LRLONDON
LRSWISS
Exogenous variables: C
Sample: 2000M01 2020M05
Included observations: 236

Lag LogL LR FPE AIC SC HQ

0 -5311.197 NA 5.22e+09* 45.07794* 45.19536* 45.12528*

1 -5257.736 102.8450* 5.70E+09 45.16725 46.22402 45.59324
2 -5222.166 66.01626 7.27E+09 45.40818 47.40429 46.21283
3 -5189.543 58.33386 9.53E+09 45.67409 48.60954 46.8574
4 -5143.851 78.6052 1.12E+10 45.82925 49.70404 47.39121
5 -5101.278 70.35395 1.36E+10 46.01083 50.82497 47.95145
6 -5062.348 61.69506 1.72E+10 46.22328 51.97677 48.54256
7 -5009.437 80.26302 1.95E+10 46.31726 53.01009 49.0152
8 -4957.946 74.61846 2.25E+10 46.42327 54.05544 49.49986

* indicates lag order selected by the criterion

LR: sequential modified LR test statistic (each test at 5% level)
FPE: Final prediction error
AIC: Akaike information criterion
SC: Schwarz information criterion
HQ: Hannan-Quinn information criterion

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Table 4.8.6 - Pairwise Granger Causality Test

Pairwise Granger Causality Tests

Sample: 2000M01 2020M05
Lags: 1
Null Hypothesis: Obs F-Statistic Prob. Hypothesis(H0)

LRAUSTRALIA does not Granger Cause LRINDIA 243 0.43065 0.5123 Accept
LRINDIA does not Granger Cause LRAUSTRALIA 0.98165 0.3228 Accept

LRBRAZIL does not Granger Cause LRINDIA 243 3.51013 0.0622 Accept
LRINDIA does not Granger Cause LRBRAZIL 0.05016 0.823 Accept

LRCHINA does not Granger Cause LRINDIA 243 0.14621 0.7025 Accept
LRINDIA does not Granger Cause LRCHINA 0.03872 0.8442 Accept

LRHONGKONG does not Granger Cause LRINDIA 243 7.68024 0.006 Reject
LRINDIA does not Granger Cause LRHONGKONG 0.17685 0.6745 Accept

LRJAPAN does not Granger Cause LRINDIA 243 1.16288 0.282 Accept
LRINDIA does not Granger Cause LRJAPAN 0.01185 0.9134 Accept

LRNETHRLND does not Granger Cause LRINDIA 243 3.9041 0.0493 Reject
LRINDIA does not Granger Cause LRNETHRLND 0.05377 0.8168 Accept

LRGERMAN does not Granger Cause LRINDIA 243 4.55395 0.0339 Reject
LRINDIA does not Granger Cause LRGERMAN 0.00127 0.9716 Accept

LRLONDON does not Granger Cause LRINDIA 243 4.30565 0.0391 Reject
LRINDIA does not Granger Cause LRLONDON 0.09796 0.7546 Accept

LRSWISS does not Granger Cause LRINDIA 243 7.98308 0.0051 Reject
LRINDIA does not Granger Cause LRSWISS 0.23847 0.6258 Accept

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LRCHINA does not Granger Cause LRAUSTRALIA 243 5.95886 0.0154 Reject
LRAUSTRALIA does not Granger Cause LRCHINA 0.58512 0.4451 Accept

LRHONGKONG does not Granger Cause LRAUSTRALIA 243 7.67792 0.006 Reject
LRAUSTRALIA does not Granger Cause LRHONGKONG 0.03787 0.8459 Accept

LRJAPAN does not Granger Cause LRAUSTRALIA 243 4.55875 0.0338 Reject
LRAUSTRALIA does not Granger Cause LRJAPAN 0.00406 0.9492 Accept

LRNETHRLND does not Granger Cause LRAUSTRALIA 243 5.18417 0.0237 Reject
LRAUSTRALIA does not Granger Cause LRNETHRLND 1.90634 0.1687 Accept

LRLONDON does not Granger Cause LRAUSTRALIA 243 7.71913 0.0059 Rejecct
LRAUSTRALIA does not Granger Cause LRLONDON 2.30865 0.13 Accept

LRSWISS does not Granger Cause LRAUSTRALIA 243 8.21802 0.0045 Reject
LRAUSTRALIA does not Granger Cause LRSWISS 1.18948 0.2765 Accept

LRUSA does not Granger Cause LRAUSTRALIA 243 8.48517 0.0039 Reject
LRAUSTRALIA does not Granger Cause LRUSA 1.43176 0.2327 Accept

LRJAPAN does not Granger Cause LRCHINA 243 0.00023 0.988 Accept
LRCHINA does not Granger Cause LRJAPAN 4.46848 0.0356 Reject

LRNETHRLND does not Granger Cause LRJAPAN 243 5.26586 0.0226 Reject
LRJAPAN does not Granger Cause LRNETHRLND 2.82715 0.094 Accept

LRGERMAN does not Granger Cause LRJAPAN 243 5.92573 0.0157 Reject
LRJAPAN does not Granger Cause LRGERMAN 2.67182 0.1035 Accept

LRSWISS does not Granger Cause LRJAPAN 243 7.25029 0.0076 Reject
LRJAPAN does not Granger Cause LRSWISS 1.26339 0.2621 Accept

LRSWISS does not Granger Cause LRNETHRLND 243 5.6358 0.0184 Reject
LRNETHRLND does not Granger Cause LRSWISS 0.20193 0.6536 Accept

LRSWISS does not Granger Cause LRGERMAN 243 4.58422 0.0333 Reject
LRGERMAN does not Granger Cause LRSWISS 0.0043 0.9478 Accept

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LRSWISS does not Granger Cause LRLONDON 243 6.37387 0.0122 Reject
LRLONDON does not Granger Cause LRSWISS 0.03373 0.8544 Accept

LRUSA does not Granger Cause LRLONDON 243 1.40131 0.2377 Accept
LRLONDON does not Granger Cause LRUSA 4.35983 0.0379 Reject

LRUSA does not Granger Cause LRSWISS 243 0.15239 0.6966 Accept
LRSWISS does not Granger Cause LRUSA 4.90108 0.0278 Reject

LRNETHRLND does not Granger Cause LRAUSTRALIA 243 5.18417 0.0237 Reject
LRAUSTRALIA does not Granger Cause LRNETHRLND 1.90634 0.1687 Accept

Inference: From the above table depicting the results of Granger Causality Test. We can infer
that there exists absolutely no correlation with reference to the Indices for the following
combination of Indices:
• Australia and India
• Brazil and India
• China and India
• Japan and India
It is also noteworthy that Hong Kong has an Impact on Indian Stock Market. This effect is a One-
way effect however Indian Stock market does not have effect on Hong Kong stock market. This
helps the day traders to take their positions accordingly as the Hong Kong market opens before
Indian Stock market.
From the test it can be clearly seen that the following stock Indices have effect on Indian Stock
market
• Hong Kong
• Netherlands
• German
• London
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• Switzerland

The Switzerland Index has been affecting the following Indices

a. Japan
b. Netherlands
c. Germany
d. London

The USA stock Index has its effect on the following Indices
• Australia
• London
• Switzerland

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4.9 Average Risk Return.

Table 4.9.1 Average Annual Return and Risk of Selected Stock Indices.

Country Returns Risk CV

INDIA 8.970042 6.79595 0.757627
LRUSA 2.6864 4.483316 1.668894
LRSWISS 1.724731 3.874606 2.246499
LRGERMAN 2.369148 6.093838 2.572165
LRNETHRLND -0.77771 5.479455 -7.0456
LRHONGKONG 2.197032 6.012824 2.736794
LRCHINA 3.047278 7.537037 2.473367
LRLONDON -0.20277 3.983948 -19.6471
LRAUSTRALIA 2.896109 3.964379 1.368864
LRJAPAN 0.248484 5.629454 22.65518
LRBRAZIL 7.980081 7.324401 0.917835

Graph 4.9.1 Graphical representation of Annual Average Return of the Selected Indices.

Anual Average Return

10

6
Return %

-2

Countries

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STOCK MARKET

Graph 4.9.2- Graphical representation of Risk and Co-variance.

Risk and Co vairance

30

20

10
Risk and CV

-10

-20

-30
Countries

Risk CV

Inference: The above graph shows the returns of various selected stock indices for over a period
of 20 years. It is noteworthy that the returns of Indian stock Index is highest when compared to the
other stock indices. The least returns delivered over the last 20 years is Netherlands.
The Indian Stock Index has delivered an average of 8% for over 20% on an average with the risk
of 6.7%. The least returns with high risk lie with Japan with return and risk of 0.2% and 5.6%
respectively.

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CHAPTER-5
FINDINGS, CONCLUSION AND SUGGESTIONS

5.1: Findings:

• From the conducted tests it can be found out that there is exists one way inter
dependence between Hong Kong and India.
• While the other chosen stock Indices have no effect on the Indian stock market.
• The data chosen for the study is Normally distributed and therefore considered
useful for the study. It is also noted that most of the data is Platykurtic in nature.
(Kurtosis value <3)
• The data chosen for the study has Unit Root Problem or in other words the data
chosen is not stationary.
• The Heteroskedasticity test reveals that the data chosen for this purpose is
Heteroskedasticity in nature.
• Apart from the Indian Stock market perspective it is also noteworthy that USA has
positive correlation with Australia, Hong Kong, London, Netherland, Germany and
Switzerland.
• Another interesting fact to be acknowledged out of this study is that China has very
minimal correlation with the other stock indices.

5.2 Suggestions:
In order to put a data, set a clean data set without any spurious regression it has to pass test such
as Normality, Stationary, Heteroscedasticity and Multi Collinearity. The results obtained however
favourable it is more advisable that the returns can be put to such tests instead of putting the price
directly to test.

The data chosen has been chosen on month to month basis which average outs the odds of special
events and other scenarios. Therefore, for further study daily closing data can be chosen as it offers
more realistic and reliable results and more accurate conclusions can be drawn out of the same.

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From the Indian investors point of view, it is highly recommended that they avoid investing in
other stock Indices as the returns of Indian Stock Index is high compared to the others. While
others are giving out minimal returns it also comes with the tag of high risk.

In case however if a investor still chooses to invest in other stock indices it can be done so with
the countries stock Index by closely examining the Beta quotient with respect to the Indian stock
market as it minimises the risk of Overall Portfolio.

5.3 Conclusion:
This study aimed at finding out the inter-relationship, Inter-dependence and Inter-correlation
between the selected stock indices. The ADF test revealed the data accuracy at the First-Level of
difference while the JB test pointed out the normalcy of the selected data.

Among the chosen variables it is highly appreciable as the Indian Stock market Index has given
the highest return in a span of 20 long years. Also, the Granger Causality test reveals that hardly
any of the chosen variables have impact on Indian Stock market except for Hong Kong.

On a concluding note, Hong Kong market affects the Indian stock market of the all chosen lot
while other have no impact.

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 APPENDICES
PLAGIARISM REPORT