EXAMINING RELATIONSHIP BETWEEN PAKISTAN STOCK EXCHANGE AND BOMBAY STOCK EXCHANGE (A CO-INTEGRATION APPROACH)
International cross listing has enlarged the interest of academics and investors to the subject of co- movement among the stock markets of the world. This study inspects the co integration of Pakistan stock exchange (KSE 100 index) with Bombay stock exchange (BSE 100 index). Daily data of both stock exchanges are collected from 2000 to 2014. Unit root test, Johansen Co-integration test and Engle- Granger tests are used for the data analysis. Results depict that there is no co-integration between the two selected exchanges. The study suggests that investors in Pakistan, may not diversify their risk by selecting in the Bombay equity market and also they may not enjoy benefits of diversification rather than investing in other countries outside Asian region. Also the Indian investors may not maximize their wealth by investing in Pakistani equity market.
Keywords: Co integration, Pakistan stock exchange, Bombay stock exchange, Unit root