Stock Market Interlinkages in Emerging Markets

Among all type of markets, the stock markets are the most volatile and most sensitive to external as well as internal news. This is because stock markets work on spot and the potential for instant profits (or losses) makes them a platform for intense speculative activities. How can one predict the future trends in a stock exchange and its influences on the other stock exchanges, has always been a fascinating question. With the never exhausting innovations in communication and information technology, it could be expected that the stock exchanges all over the world are closely interlinked and no stock exchange can be immune to external influences. The recent experience of stock markets crash in the Far East and its repercussions for the neighbouring markets is but one example of how the so-called ‘mass psychology’ can make stock markets so fragile.