Business and Economic Horizons
Previous Article | Back to Volume | Next Article | |
Abstract | References | Citation | Download | Preview | Statistics | |
Volume | 13 |
Issue | 1 |
Online publication date | 2017-03-05 |
Title | Analysis of the impact of select macroeconomic variables on the Indian Stock Market: A heteroscedastic cointegration approach |
Author | Naushad Alam |
Abstract | The present study examines the impact of the macroeconomic variables on the stock prices in India. To fulfil the objective of the study monthly data of inflation, short-term interest rate, long-term interest rate, index of industrial production, exchange rate, money supply, and the stock indices of CNX Nifty and BSE SENSEX were collected from March 2005 to April 2013. Heteroscedastic cointegration approach was employed using a Johansen test of cointegration, OLS and GARCH (1, 1) model to find out the long-term relationship between the selected macroeconomic variables and the stock prices. It is evident from the study that there exist the long-term heteroscedastic relationships between the stock prices and the macroeconomic variables chosen for the study. Further, it is also evident from the study that while INF, MSE and the IIP are positively related to the stock prices, the SIR, LIR and the EXR are negatively related to the stock prices. |
Citation | |
References | Ahmed, S. (2008). Aggregate economic variables and the stock market in India. International Journal of Finance and Economics, 14, 144-64. Abdalla, I. S. A., & Murinde, V. (1997). Exchange rate and stock price interactions in emerging financial markets: Evidence on India, Korea, Pakistan and Philippines. Applied Financial Economics, 7(1), 25-35. https://doi.org/10.1080/096031097333826 Chancharoenchai, K., Dubog-Lu, S., & Mathur, I. (2005). Stock returns and the macroeconomic environment prior to the Asian crisis in selected Southeast Asian countries. Emerging Markets Finance and Trade, 41(4), 38-56. Ewing, B. T. (2002). Macroeconomic news and the returns on the financial companies. Managerial and Decision Economics, 23(8), 39-46. https://doi.org/10.1002/mde.1093 Fama, E. (1981). Stock returns, real activity, inflation and money. American Economic Review, 71(4), 545-564. French, K. R. Schwert, G.W., & Stanbaugh, R. F. (1987). Expected stock returns and volatility. Journal of Financial Economics, 19(1), 3-29. https://doi.org/10.1016/0304-405X(87)90026-2 Husain, F., & Mahmood, T. (2001). The stock market and the economy in Pakistan. The Pakistan Development Review, 40(2), 107-114. Ioannidis, C., & Kontonikas, A. (2008). The impact of monetary policy on stock prices. Journal of Policy Modeling, 30(1), 33-53. https://doi.org/10.1016/j.jpolmod.2007.06.015 Johansen, S., & Juselius, K. (1990). Maximum likelihood estimation and inference on cointegration - with applications to the demand for money. Oxford Bulletin of Economics and Statistics, 52(2), 169–210. https://doi.org/10.1111/j.1468-0084.1990.mp52002003.x Kwon, C. S., & Shin, T. S. (1999). Co-integration and causality between macroeconomic variables and stock returns. Global Finance Journals, 10(1), 71-81. https://doi.org/10.1016/S1044-0283(99)00006-X Maysami R. C., & Koh, T.C. (2000). Vector error correction model of the Singapore Stock Market. International Review of economic and finance, 9(1), 79-96. https://doi.org/10.1016/S1059-0560(99)00042-8 Mukherjee, T.K., & Naka, A. (1995). Dynamic relations between macroeconomic variables and the Japanese stock market: An application of a vector error correction model. The Journal of Financial Research, 18(2), 223-237. https://doi.org/10.1111/j.1475-6803.1995.tb00563.x Ratanapakorn, O. & Sharma, S.C. (2007). Dynamic analysis between the US stock returns and the macroeconomic variables. Applied Financial Economics, 17(5), 369-375. https://doi.org/10.1080/09603100600638944 Serfling, M. A. & Miljkovic, D. (2011). Time series analysis of the relationships among (macro) economic variables, the dividend yield and the price level of the S&P 500 Index. Applied Financial Economics, 21(15), 1117-1134. https://doi.org/10.1080/09603107.2011.562167 Tripathy, N. (2011). Causal relationship between macro-economic indicators and stock market in India. Asian journal of Finance and Accounting, 3(1), 208-226. https://doi.org/10.5296/ajfa.v3i1.633 |
Keywords | Stock market, India, macroeconomic variables, heteroscedastic cointegration |
DOI | http://dx.doi.org/10.15208/beh.2017.09 |
Pages | 119-127 |
Download Full PDF | Download |
Previous Article | Back to Volume | Next Article |
Share |