Pramod Kumar, Naik and Puja, Padhi (2012): The impact of Macroeconomic Fundamentals on Stock Prices revisited: An Evidence from Indian Data.
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The study investigates the relationships between the Indian stock market index (BSE Sensex) and five macroeconomic variables, namely, industrial production index, wholesale price index, money supply, treasury bills rates and exchange rates over the period 1994:04–2011:06. Johansen’s co-integration and vector error correction model have been applied to explore the long-run equilibrium relationship between stock market index and macroeconomic variables. The analysis reveals that macroeconomic variables and the stock market index are co-integrated and, hence, a long-run equilibrium relationship exists between them. It is observed that the stock prices positively relate to the money supply and industrial production but negatively relate to inflation. The exchange rate and the short-term interest rate are found to be insignificant in determining stock prices. In the Granger causality sense, macroeconomic variable causes the stock prices in the long-run but not in the short-run. There is bidirectional causality exists between industrial production and stock prices whereas, unidirectional causality from money supply to stock price, stock price to inflation and interest rates to stock prices are found.
|Item Type:||MPRA Paper|
|Original Title:||The impact of Macroeconomic Fundamentals on Stock Prices revisited: An Evidence from Indian Data|
|Keywords:||Stock market index, macroeconomic variables, co-integration test, causality test|
|Subjects:||E - Macroeconomics and Monetary Economics > E4 - Money and Interest Rates > E44 - Financial Markets and the Macroeconomy
C - Mathematical and Quantitative Methods > C2 - Single Equation Models ; Single Variables > C22 - Time-Series Models ; Dynamic Quantile Regressions ; Dynamic Treatment Effect Models ; Diffusion Processes
G - Financial Economics > G0 - General
|Depositing User:||Mr. Pramod Kumar Naik|
|Date Deposited:||23. May 2012 20:52|
|Last Modified:||09. Aug 2015 06:32|
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