1. Study of Co-Movement and
Interdependence of Indian Stock Market
with Foreign Stock Markets
JASPAL SINGH ASHAN
SHUBHAM GUPTA
MUKESH
CHIRAG

2. ANALYSIS OF TOPIC
Financial Problem: In this project, we are going to see whether
different markets move together or find out the important differences in
the characteristics of co-movement of stock market between the
developed and emerging stock markets w.e.f. 2000to 2012 in relation with
BSE Sensex stock-prices.

3. NAME OF EQUITY INDEX OF DIFFERENT COUNTRIES:
Serial no. Name of countries Name of Equity
Index
1 INDIA BSE Sensex
2 AUSTRALIA ASX
3 GERMANY DAX30
4 FRANCE CAC40
5 US NASDAQ
6 MEXICO IPC ALLSHARES
7 BRAZIL BM&F BOVESPA
8 HONGKONG HANGSENG
9 CHINA SSE
10 NETHERLAND EURONEXT
11 JAPAN NIKKEI

4. OBJECTIVES
 To Analyze The Performance Of Bse Sensex.
 To Analyze The Performance Of developing and
emerging markets.
 To Know The Risk And Return Of The Bse & other
foreign markets.
 To Correlate The Performance Of Bse Sensex With
other foreign markets With The Help Of Returns.
 To Identify The Factors Influencing The Indices.

5. SCOPE
To examine the short-run causal linkages
among equity markets to better understand
how shocks in one market are transmitted to
other markets.

6. LITERATURE REVIEW
Initially , Under regular market conditions,
When trading by noise traders moves prices away
from fundamentals, convergence traders take
advantage of arbitrage opportunities, and stabilize
prices. However, when the wealth
Effect associated with initial losses dominates the
substitution effect.
Studies the changes in investors’ risk aversion in times
of market down turns. In our model, the link between
liquidity and returns is established via an increasing risk
a version towards illiquidity in reaction to price drops.

7. METHODOLOGY
DESCRIPTIVE STATISTICS
It provides simple summaries about observations that
have been made. Such summaries may be either
quantitative or visual.
Mean : The arithmetic mean is the "standard"
average, often simply called the "mean".

8. STANDARD DEVIATION
Statistics and probability theory, standard deviation
(represented by the symbol sigma, σ) shows how
much variation or "dispersion" exists from the
average .
A low standard deviation indicates that the data
points tend to be very close to the mean and vice
versa.

9. REGRESSION
Regression analysis is also used to understand which
among the independent variables are related to the
dependent variable.

10. CORRELATION
The correlation coefficient ρX,Y between two random
variables X and Y with expected values μX and μY
and standard deviations σX and σY is defined as:

11. DESCRIPTIVE STATISTICS
Descriptive statistics (Jan 2000 – Oct 2012)
Equity index Mean Standard
deviation
BSE SENSEX .0002 .00797
SSE .0001 .00786
Euronext .00000 .00629
CAC40 -.0001 .00751
NASDAQ .00000 .00882
ASX .0001 .00506
Hang Seng .0000 .00781
Nikkei -.0001 .00749
IPC all Shares .0003 .00716
DAX30 .0000 .00751
BM&F Bovespa .0002 .00937

12. DESCRIPTIVE TABLE BEFORE 17 JAN 2008 DESCRIPTIVE TABLE AFTER 17 JAN 2008
PARTICULARS MEAN Std. PARTICULARS MEAN Std.
DEVIATION DEVIATION
ASX -.0001 .00623 ASX .0002 .00392
BSE .0001 .00463 BSE .0003 .00274
EURONEXT -.0003 .00786 EURONEXT .0001 .00543
IPC ALL SHARES .0002 .00775 IPC ALL SHARES .0004 .00680
CAC 40 -.0002 .00889 CAC 40 .000 .00653
BM&F BOVESPA .000 .0103 BM&F BOVESPA .0003 .00885
SSE .000 .00628 SSE -.0001 .00852
NIKKEI -.0002 .00898 NIKKEI -.0001 .00643
HANG SENG -.0001 .00975 HANG SENG .0001 .00640
NASDAQ .001 .00868 NASDAQ -.001 .00880
By using structural break there is no change in results and
still we can say that asx and ipc all shares are better in terms
of return and risk.

13. CORRELATION
Equity index BSE
BSE SENSEX 1
SSE .005
Euronext .007
CAC40 .005
NASDAQ .047
ASX -.010
Hang Seng .027
Nikkei .046
IPC All Shares -.003  GRAPH OF DAX
DAX30 -.025
BM&F bovespa .004

14.  The second graph shows the reasons of certain change in the
market of U.S.A

15. CORRELATION TABLE (BEFORE & AFTER 17 JAN 2008)
PARTICULARS (BEFORE 17 JAN 2008) (AFTER 17 JAN 2008)
SENSEX/ASX -.018 -.011
SENSEX/DAX -.019 .177
SENSEX/EURONEXT -.018 .027
SENSEX/IPS ALL SHARES .104 .285
SENSEX/CAC40 -.052 .033
SENSEX/BM&F BOVESPA .012 .002
SENSEX/SSE .010 -.003
SENSEX/NIKKEI .104 .067
SENSEX/HANGSENG .200 .082
SENSEX/NASDAQ .250 .145
 Correlation before 17 jan is highest for nasdaq(.250) with bse whereas
correlation after 17 jan is highest for ipc all shares(.285) with bse.
 During the year 2008 to 2010 India and Mexico were set to double their trade
said by pm of mexico.

16. Logbse
Logbse logipcallshares
logipcallshares
Before 17 Jan 2008 After 17 Jan 2008
Correlation before 17 jan is .104 and after 17 jan is highest for ipc all
shares(.285) with bse.

17. REGRESSION
Equity index B Sig.
BSE(constant) .000 .210
SSE .010 .625
Euronext .008 .752
CAC40 .045 .037
Nasdaq .042 .019
BM&F Bovespa .001 .969
ASX -.024 .436
Hang Seng .022 .279
Nikkei .043 .039
IPC All Shares -.009 .668
Dax30 -.032 .124

18. REGRESION TABLE BEFORE 17 JAN 2008 REGRESSION TABLE AFTER 17 JAN 2008
PARTICULARS BETA SIGNIFICANCE
PARTICULARS BETA SIGNIFICA
LEVEL
NCE LEVEL
ASX -.036 .467
ASX -.013 -.329
DAX 30 -.021 .437
DAX 30 .180 .000
EURONEXT -.025 .446
EURONEXT .030 .410
IPC ALL SHARES .114 .000
IPC ALL SHARES .328 .000
CAC40 -.056 .033
CAC40 .034 .304
BM&F BOVESPA .011 .619
BM&F BOVESPA .002 .942
SSE .009 .677
SSE -.004 .926
NIKKEI .118 .000
NIKKEI .066 .038
HANG SENG -.026 .399 HANG SENG -.036 .164
NASDAQ .015 .508 NASDAQ .031 .290
 Before Nikkei shows greater risk (.118) with high sig.(.000) whereas Dax30
shows greater risk (.180) with high sig. (.000) due to stock market crisis.

19. INTERPRETATION OF STATISTICAL RESULTS-
CONTENT AND DEPTH:
 Always investor wants to invest in a market , where
he must go in which he gets maximum return for a
given level of risk and minimum risk for a given
level of return. Investor need to thoroughly analysis
the trend of the market in order to have relative risk
and return of his investment.
 In our project if Indian investor have surplus money
and if he want to invest in foreign markets he must
prefer Ipc all share that give them maximum return
more than bse throughout our analysis.

20. ABILITY TO HIGHLIGHT LIMITATIONS AND
SUGGESTIONS FOR FURTHER RESEARCH:
We could took other parameter to measure the correlation
between foreign markets and BSE i.e.
1. Governments measures.
 FDI(foreign policy)
 Monetary measures( CRR,SLR,REPO etc.)
 Fiscal measures(Tax policies, Govt. spending)
 Welfare of the economy
2. Company policies(index shares).
3. Political relations.
4. EIC approach