International Journal of Religion 2024 Volume: 5| Number 10 | pp. 659 – 679 ISSN: 2633-352X (Print) | ISSN: 2633-3538 (Online) ijor.co.uk DOI: https://doi.org/10.61707/kscmj292 Impulsive Response Analysis of Financial Markets in QUAD Economies: A VAR Modelling Approach Abdul Malik Syed 1 , Razia Nagina 2 and Pretty Bhalla 3 Abstract Financial market integration remains a key focus in academic finance, especially given how crucial it is to portfolio diversification. The purpose of this research is to investigate a crucial yet underexplored aspect like the cointegration of economies with formal or unofficial military ties, focusing on countries within the Quad strategic forum—India, Japan, Australia, and the United States. The daily closing values of benchmark stock market indices of Quad economies viz. Nikkie 225 for Japan, S&P ASX 200 for Australia, NASDAQ composite for the United States, and S&P Sensex for India were considered. Unit root tests, Johansen Cointegration tests, VAR (Vector Autoregressive) model, and the Granger Causality statistics are computed for data analysis. Additionally, the Impulse response function and variance decomposition are computed for better financial market predictions. The result reveals intriguing dynamics: while the Indian stock market initially responds positively to shocks in the Australian market, this effect diminishes over time. Also, movements in the Australian and United States stock markets significantly contribute to predicting fluctuations in the Indian market, contrasting with the limited predictive power of the Japanese stock market. These findings carry significant practical implications for international investors, offering valuable guidance for optimizing portfolio diversification strategies amidst geopolitical and economic complexities. This paper contributes to academic literature by offering empirical insights into the short- term dynamics and causal relationships of Quad countries’ stock markets, setting a foundation for future studies on long-term trends and market responses to external factors. Keywords: Financial Market Integration, Forecast Error Decomposition, Military Ties, Quad Economies, Impulse Response Analysis, Portfolio Diversification INTRODUCTION Studying the cointegration of various indices and economic indicators of a specific country or group of countries holds immense importance for economic analysis, policy formulation, investment decisions, risk management, forecasting, business strategy, international trade, academic research, and overall economic stability and growth of selected countries (Sirajuddin et al., 2023). Academic finance strongly emphasizes financial market integration, mainly due to its importance to portfolio diversification (Patel et al., 2022). Financial market integration exists when financial markets from several nations behave or move harmoniously and exhibit the same expected risk-adjusted returns (Patel, 2019). Many researchers have empirically examined the existence of long- and short-term financial market integrations of various economies inter se and intra se (Alomari et al., 2024; Ertuğrul, 2024; Lv et al, 2023; Nagina, 2022; Patel et al., 2022; Jacob et al., 2021). The researchers have selected different economies on different grounds for empirically analyzing the presence of cointegration among their markets, viz. financial, commodity, or currency markets and macroeconomic variables such as financial and economic development, financial growth, imports, foreign direct investments, energy consumption, CO2 emission, infrastructure development, etc (Allayioti & Venditti, 2024; Alomari et al., 2024; Ertuğrul, 2024; Sharma & Khanna, 2024; Lv et al, 2023; Nagina, 2022; Patel et al., 2022; Jacob et al., 2021). When conducting their research, some researchers (Chakrabarty & Ghosh, 2011) focused on developed countries, while others (Gupta & Guidi, 2012) focused on developing nations. For in-depth insights, many academics, including Nautiyal and Kavidayal (2018), Patel (2017), and Bhattacharjee and Swaminathan (2016), 1 Assistant Professor at University of Business and Technology, Jeddah, Saudi Arabia; E-mail: a.syed@ubt.edu.sa 2 Associate Professor at Lovely Professional University, Jalandhar, Punjab, India; E-mail: razia.23646@lpu.co.in 3 Professor at Lovely professional University, Jalandhar, Punjab, India; E-mail: pretty.21576@lpu.co.in