Market Fluctuations and Country Risk Relationships for Australian and Indian Energy

Abstract

Indians and Australians have a great deal more in common than a love of the game of cricket. A recent Australia–India energy and minerals forum (Australian Ministry for Foreign Affairs and Trade 2010) acknowledged that there exists a mutual respect for democracy and the rule of law. In both countries pluralism and human rights are important social objectives. Australia and India are cooperating increasingly on matters relating to trade and investment, international security, climate change, science and education, but also in the areas of resources and energy. The forum made the point that India is soon to become Australia’s third largest export market, after China and Japan (e.g., two-way trade between India and Australia had grown to 22 billion dollars in 2008–2009).

Appendix

Augmented Dickey–Fuller unit root test results for price data and first differences of price data (Dickey and Fuller 1981)

Variable	Level seriest statistics	First difference series t statistics
Australian energy sector price index	−0.7977	−9.4313*
Indian energy sector price index	−1.4370	−10.6678*
Economic risk rating: Australia	−1.3246	−11.5675*
Financial risk rating: Australia	−1.9890	−10.0720*
Political risk rating: Australia	−3.4042**	−11.8873*
Economic risk rating: India	−2.9588**	−10.3904*
Financial risk rating: India	−2.2075	−8.9656*
Political risk rating: India	−2.3370	−12.2086*
Australian stock exchange price index	−1.3375	−7.0473*
Indian stock exchange price index	−0.8238	−8.7795*

1. Critical values for augmented Dickey–Fuller unit root tests are −3.4950 at the 1% significance level (*), −2.8898 at the 5% significance level (**), and −2.5819 at the 10% significance level