The Impact of Macroeconomic Indicators on Indian Stock Prices: An Empirical Analysis
The purpose of the present study is to examine the long run and the short run relationship between stock price and a set of macroeconomic variables for Indian economy using annual data from 1979 to 2014. The long run relationship is examined by implementing the ARDL bounds testing approach to co-int...
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Online Access: | https://doi.org/10.1515/sbe-2017-0005 |
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doaj-d4d2c27f518248c2a9746084908a56b92021-09-05T14:00:25ZengSciendoStudies in Business and Economics2344-54162017-04-01121617810.1515/sbe-2017-0005sbe-2017-0005The Impact of Macroeconomic Indicators on Indian Stock Prices: An Empirical AnalysisGiri A. K.0Joshi Pooja1Department of Economics and Finance, Birla Institute of Technology and Science (BITS), IndiaDepartment of Economics and Finance, Birla Institute of Technology and Science (BITS), IndiaThe purpose of the present study is to examine the long run and the short run relationship between stock price and a set of macroeconomic variables for Indian economy using annual data from 1979 to 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 is used to predict long run exogenous shocks of the variables. The results confirm a long run relationship among the variables. Evidence suggests that Economic growth, inflation and exchange rate influence stock prices positively. However, crude oil price influences the stock price negatively. This implies that the increase in oil price induces inflationary expectation in the mind of investors and hence stock prices are adversely affected. The VECM result indicates that short run and long run unidirectional causality running from economic growth and FDI 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. The Government can take steps to control the crude oil price in India and Investors’ confidence has to be gained by boosting the economic growth of the economy through appropriate policy tools.https://doi.org/10.1515/sbe-2017-0005bse indexeconomic growthcrude oil priceardlvecm |
collection |
DOAJ |
language |
English |
format |
Article |
sources |
DOAJ |
author |
Giri A. K. Joshi Pooja |
spellingShingle |
Giri A. K. Joshi Pooja The Impact of Macroeconomic Indicators on Indian Stock Prices: An Empirical Analysis Studies in Business and Economics bse index economic growth crude oil price ardl vecm |
author_facet |
Giri A. K. Joshi Pooja |
author_sort |
Giri A. K. |
title |
The Impact of Macroeconomic Indicators on Indian Stock Prices: An Empirical Analysis |
title_short |
The Impact of Macroeconomic Indicators on Indian Stock Prices: An Empirical Analysis |
title_full |
The Impact of Macroeconomic Indicators on Indian Stock Prices: An Empirical Analysis |
title_fullStr |
The Impact of Macroeconomic Indicators on Indian Stock Prices: An Empirical Analysis |
title_full_unstemmed |
The Impact of Macroeconomic Indicators on Indian Stock Prices: An Empirical Analysis |
title_sort |
impact of macroeconomic indicators on indian stock prices: an empirical analysis |
publisher |
Sciendo |
series |
Studies in Business and Economics |
issn |
2344-5416 |
publishDate |
2017-04-01 |
description |
The purpose of the present study is to examine the long run and the short run relationship between stock price and a set of macroeconomic variables for Indian economy using annual data from 1979 to 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 is used to predict long run exogenous shocks of the variables. The results confirm a long run relationship among the variables. Evidence suggests that Economic growth, inflation and exchange rate influence stock prices positively. However, crude oil price influences the stock price negatively. This implies that the increase in oil price induces inflationary expectation in the mind of investors and hence stock prices are adversely affected. The VECM result indicates that short run and long run unidirectional causality running from economic growth and FDI 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. The Government can take steps to control the crude oil price in India and Investors’ confidence has to be gained by boosting the economic growth of the economy through appropriate policy tools. |
topic |
bse index economic growth crude oil price ardl vecm |
url |
https://doi.org/10.1515/sbe-2017-0005 |
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