What drives the stock markets ? evidence from India

Fadzil, Anas and Masih, Mansur (2018): What drives the stock markets ? evidence from India.

Abstract

This study wants to investigate what drives the stock markets. India was taken as a case study. The standard time series techniques were used. The macroeconomic variables used were industrial production index, wholesale price index and exchange rate. The results demonstrate that the stock markets and macroeconomic variables are cointegrated suggesting the existence of a long-run equilibrium relationship between stock markets and macroeconomic variables. The findings further tend to indicate that stock markets are driven mainly by the WPI, which represents Inflation followed by the exchange rate. Therefore, the policy makers should focus on the inflation rate and exchange rate to stabilize the stock markets.

• Item Type: MPRA Paper
• Language: English
• Keywords: Stock Market Index, Macroeconomic Variables, VECM, VDC, India
• Subjects: C - Mathematical and Quantitative Methods > C2 - Single Equation Models ; Single Variables > C22 - Time-Series Models ; Dynamic Quantile Regressions ; Dynamic Treatment Effect Models ; Diffusion Processes; C - Mathematical and Quantitative Methods > C5 - Econometric Modeling > C58 - Financial Econometrics; E - Macroeconomics and Monetary Economics > E4 - Money and Interest Rates > E44 - Financial Markets and the Macroeconomy

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