Integrated Spillover Effect of Cross-Listed Stock Markets on the Indian Equity Market

  • Aditya Keshari Doctoral Fellow, Institute of Management Studies, BHU, Varanasi, India
  • Amit Gautam Professor, Institute of Management Studies, BHU, Varanasi, India
  • Vishal Kumar Singh Assistant Professor, School of Management Sciences, Varanasi, India
Keywords: Volatility modeling, Johansen Co-integration Test, Multivariate Granger Causality Test, Indian Stock Market


The increased integration due to cross-listing leads to the volatility spillover effect on the domestic market posing from the cross-listed global indices viz., Nifty 50 from India, Luxx 100 from Luxembourg, NASDAQ from the US, and FTSE_Aim 100 from the UK. Johansen Co-integration test is applied to check the level of integration, which is further checked by multivariate granger causality showing the causality pattern among the indices. GARCH (1,1) model is applied to examine the volatility spillover effect on the Indian Stock Market. The findings suggest that the series are co-integrated with one vector ‘v,’which is confirmed by the Trace and Max-Eigen Test. The Multivariate Granger Causality test confirms the bivariate causal pattern between India and US markets, implying the dual effect. In contrast, the Luxembourg market is relatively exogenous, which gives investors an opportunity for portfolio diversification. ARCH term is significant in the GARCH (1,1) model showing that the past innovation in the time series leads to the present fluctuation in the Indian stock market. Also, the results show a significant spillover effect from the US and UK markets. Thus, this will assist the investors that by concentrating on the movement of these markets, they can take specific actions regarding portfolio management.