DYNAMIC RELATIONS BETWEEN MACROECONOMIC VARIABLES AND INDIAN STOCK PRICE: AN APPLICATION OF ARDL BOUNDS TESTING APPROACH
Journal Title: Asian Economic and Financial Review - Year 2015, Vol 5, Issue 10
Abstract
The purpose of the present study is to examine the dynamic long run and the short run relationship between stock price and a set of macroeconomic variables for Indian economy using monthly data from April 2004 to July 2014. The long run relationship is examined by implementing the ARDL bounds testing approach to co-integration. VECM method is used to test the short and long run causality and Variance Decomposition (VDC) is also used to explore how much the forecast error variance of a conditional stock market volatility is explained by the innovations to each explanatory conditional macroeconomic variables. The results confirm a long run co-integrating relationship among the variables. Evidence suggests that the Index of Industrial Production, inflation and exchange rate influence stock prices positively, whereas, gold price influences the stock price negatively. The VECM result indicates that only long run causality running from all the variables used in the study to stock prices in India. The result of the variance decomposition shows that stock market development in India is mostly explained by its own shocks.
Authors and Affiliations
Pooja Joshi*| Research Scholar, Department of Economics and Finance, Birla Institute of Technology and Science (BITS), Pilani, India, A K Giri| Associate Professor, Department of Economics and Finance, Birla Institute of Technology and Science (BITS), Pilani, India
Keywords
Related Articles
- EP ID EP2228
- DOI -
- Views 414
- Downloads 35
ECONOMICS IMPERIALISM: SWOT ANALYSIS
It?s been a quarter of century since one of the founders of economic imperialism was crowned with glory and awarded for the establishing of hitherto non-conventional economic approach. Application of analytical tools of...
RENMINBI AS NUMBER TWO IN EAST ASIA
This paper investigates the emerging influence of the Chinese renminbi on the exchange rate movements of East Asian currencies. China stopped pegging her currency to the US dollar and moved into a managed floating exchan...
RESEARCH, DEVELOPMENT AND INNOVATION IN MALAYSIA: ELEMENTS OF AN EFFECTIVE GROWTH MODEL
The purpose of this paper is to examine the relationship between research and development activities in Malaysia and the country?s economic growth record. In particular, the paper lays out the changes in the growth model...
CONVERGENCE AND DIVERGENCE AMONG COUNTRIES
This paper focuses on the study of the conditional convergence hypothesis among African countries that belonging to the West African Economic and Monetary Union (WAEMU), More precisely, this paper treats even the effect...
IMPOSITION OF R&D SUBSIDY IN A PRODUCT DIFFERENTIATED DUOPOLISTIC INDUSTRY
This study analyzes an imposition of government R&D investment subsidy in the standard model of vertical product differentiation with two products in a duopolistic competition. We show that the imposition of distinct sub...