Year: 2026
Type: preprint
Abstract: Does the US equity market reliably lead information transmission to India when US trade policy is weaponized against trading partners? We address this question using transfer entropy (TE) applied to daily S&P 500 and Nifty 50 log-returns over January 2024–February 2026 ( n = 497). Two hypotheses are tested. H1 (baseline hierarchy) is supported at marginal significance in the pre-tariff baseline (2024, p = 0.074). H2 (conditional hierarchy inversion) is confirmed in a concentrated October–November 2025 window: India→US TE = 0.274, p = 0.006, Z = + 3.52. Standard diagnostics preclude volatility contamination as an alternative explanation; Phase 2 — the highest-volatility regime — shows no India→US signal, ruling out global volatility as the driver; and delta-TE tests confirm the reversal is a concentrated policy-driven burst rather than a permanent structural regime change. The mechanism is the structural resilience and capital reallocation channel: India’s domestic consumption-driven growth model and geopolitical independence make its equity market a natural hedge destination during US policy stress episodes. JEL: G15 · C14 · F36
Source: Research Square
Author: DEBASIS BAGCHI
Language: English
Subfield: Economics and Econometrics
Domain: Social Sciences
Open Access status: green
OpenAlex ID: W7165180279