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Bhunia, A. (2012). Association between Crude Price and Stock Indices: Empirical Evidence from Bombay Stock Exchange. Journal of Economics and Sustainable Development, 3(3), 25-34.

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Article

Short and Long Run Relationship Analysis of Indian Stocks Cross Listed in U.S

1Department of Management Studies, National Institute of Technology, Tiruchirapalli, India


Journal of Finance and Accounting. 2013, Vol. 1 No. 2, 67-72
DOI: 10.12691/jfa-1-2-5
Copyright © 2013 Science and Education Publishing

Cite this paper:
S. Visalakshmi, P. Lakshmi. Short and Long Run Relationship Analysis of Indian Stocks Cross Listed in U.S. Journal of Finance and Accounting. 2013; 1(2):67-72. doi: 10.12691/jfa-1-2-5.

Correspondence to: S.  Visalakshmi, Department of Management Studies, National Institute of Technology, Tiruchirapalli, India. Email: visa.sr@gmail.com

Abstract

This study investigates the short run and long run relationship of returns for cross listed stocks on two non-synchronous international markets using daily data for the period from Jan 2001 to May 2012. Further, the co-movements of prices and causal relationships on ADRs of Indian stocks pertaining to telecommunication sector cross listed in the US markets is examined by applying Cointegration test, Granger causality testand Vector Error Correction Model. Results indicate that in the long run, domestic stock price series and ADR prices are cointegrated. In the short run, error correction coefficients of ADR opening prices and closing prices are statistically significant. But there persists a weak short run relationship in the domestic stock opening and closing price. Due to the weak relationship in the domestic stock opening and closing price, multimarket listing generates opportunities for arbitrage. As a result of this, the pace of global market integration gets reduced in developing markets like India due to information asymmetry.

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