scholarly journals Cointegration and Causality between Macroeconomic variables and Stock Prices: Empirical Analysis from Indian Economy

2015 ◽  
Vol 5 (2) ◽  
pp. 327 ◽  
Author(s):  
Pooja Joshi ◽  
A. K. Giri
Keyword(s):  
Stock Market ◽  
Stock Prices ◽  
Negative Relationship ◽  
Real Effective Exchange Rate ◽  
Macroeconomic Variables ◽  
Distributed Lag ◽  
Crude Oil Prices ◽  
Long Run ◽  
Short Run ◽  
Bounds Test

<p class="ber"><span lang="EN-IN">The study aims at examining how fiscal fundamental macroeconomic variables affect the performance of the stock market in India by using monthly data from April 2004- July 2015. The study makes use of Ng-Perron unit root tests to check the non-stationarity property of the series; the Auto Regressive Distributed Lag (ARDL) bounds test and a Vector Error Correction Model (VECM) for testing both short and long run dynamic relationships. The variance decomposition (VDC) is used to predict the exogenous shocks of the variables. The findings of the bounds test </span><span lang="EN-GB">confirm that there exists a long-run co-integrating relationship between different macroeconomic variables and the stock prices in India. The ARDL result suggests a long-run negative relationship exists between crude oil prices, inflation and stock prices. The results of the influence of both the variables on stock prices are consistent in the short run as well. The results of the short-run estimation confirm positive and significant relationship for Gold, T-bill rates and Real Effective Exchange Rate. The VECM result shows a bidirectional causality is running between Inflation and CNX nifty index. Further, the result indicates the presence of long run causality for the equation with a CNX nifty index as the dependent variable. The results of VDC analysis and IRF show that a major percentage of stock prices change is its own innovative shocks. The study implies that appropriate policy measures should be taken by the proficient authorities for the purpose of controlling inflation, which ultimately leads to the control of volatility of the stock market.</span></p>

Dynamic Interaction Between Macroeconomic Fundamentals and Stock Prices in Bangladesh

2018 ◽  
Vol 1 (1) ◽  
pp. 66
Author(s):  
Mostafa Ali ◽  
Gang Sun ◽  
Mohammed Ali Arshad Chowdhury
Keyword(s):  
Stock Prices ◽  
Stock Price ◽  
Negative Relationship ◽  
Decomposition Analysis ◽  
Variance Decomposition ◽  
Cointegration Test ◽  
Response Analysis ◽  
Macroeconomic Variables ◽  
Long Run ◽  
Short Run

This study attempts to investigate whether dynamics in fundamental macroeconomic factors significantly influence the stock prices of Bangladesh by applying cointegration test, Granger causality test based on the Vector Error Correction Model (VECM), Variance Decomposition and Impulse Response Analysis. Johansen and Juselius cointegration test detect six cointegrating vectors and a short-run and long-run relationship is investigated by normalizing the first cointegrating vector corresponding to the largest Eigen-value. We find a long-run positive relationship between stock price and IP, CPI, EX, and RT but a negative relationship between stock price and M2 and interest rate (both TB & GB). Empirical findings of this study reveal that no macroeconomic variables except TB Granger cause stock price in short run. Variance Decomposition analysis shows that most of the stock price variance can be explained by its own shocks in the shorter horizon but its magnitude diminishes over the long horizon which is about 26.77% after 24 months.  Therefore, empirical results suggest that stock prices are weakly exogenous relative to the macroeconomic variables. Findings of the study have important implications to market participants and financial analysts when they have chosen to invest in Bangladesh stock market.

Economic Activities and Oil Price Shocks in Indian Outlook: Direction of Causality and Testing Cointegration

2021 ◽  
pp. 097215092199049
Author(s):  
Preeti Sharma ◽  
Avinash K. Shrivastava
Keyword(s):  
Exchange Rate ◽  
Stock Market ◽  
Stock Prices ◽  
Economic Activity ◽  
Negative Relationship ◽  
Oil Prices ◽  
Industrial Output ◽  
Market Prices ◽  
Macroeconomic Variables ◽  
Short Run

The current study intends to find out the linkages between crude oil prices and economic activity in the context of Indian economy. The macroeconomic variables such as gross domestic product (GDP), unemployment, industrial output, inflation, exchange rate and stock market prices have been used as a proxy to economic activity. We have analysed the sample data of 30 years, that is, from year 1991 to 2020. To inspect the short-run relationship between oil prices and the above-mentioned macroeconomic variables, Granger causality test has been applied after removing the presence of unit root through differencing the series. To investigate the long-run relationship, vector error correction model (VECM) has been applied after testing cointegration through the Johansen method of cointegration. The findings of the study show that oil prices have short-run causality with all the variables, that is, GDP, unemployment, industrial output, inflation, exchange rate and stock market prices, while they have a long association with inflation, industrial production and unemployment. Further we find a negative relationship between oil prices and unemployment, industrial output, inflation and exchange rate and a positive relationship with GDP and stock prices.

scholarly journals Empirical Relationship between Macroeconomic Variables and Stock Prices of Indian Banking Sector: A Vector Error Correction Model Approach

2020 ◽  
Vol 12 (2) ◽  
pp. 189-198
Author(s):  
Aastha Khera ◽  
◽  
Neelam Dhanda ◽  
Keyword(s):  
Exchange Rate ◽  
Stock Market ◽  
Stock Prices ◽  
Banking Sector ◽  
Empirical Relationship ◽  
Correction Model ◽  
Macroeconomic Variables ◽  
Foreign Reserve ◽  
Long Run ◽  
Short Run

This existing study aims to investigate the relationship between Indian Bankingstock market prices and macroeconomic variables. The proxy for the Indian Banking stockmarket is Nifty Bank while Foreign Reserve, Exchange Rate (Indian vs US Dollar), Interestrate, and CPI are proxies of macroeconomic variables. Johansen Cointegration and VectorError Correction Model (VECM) on monthly data from January 2013 to July 2020 have beenapplied. Considering the results of cointegration, it is found that there is a long-run asso-ciation between the Indian Banking stock market and constituent macroeconomic variables.Next, the employment of VECM is done for inspecting long run and short-run causality.The result reveals long-run equilibrium in Indian commercial bankís stock prices comingfrom macroeconomic variables. This study has considerable imputations that investors candiversify their portfolio according to the ináuencing power of constituent selected macro-economic variables in the short run and the long run. Exchange rate and foreign reservesdrive the banking stock market in the short run whereas CPI and Interest rate do not createany signiÖcant impact.

scholarly journals Can Macroeconomic Variables Explain Long Term Stock Market Movements? A Study of Nepali Capital Market

2016 ◽  
Vol 1 (1) ◽  
pp. 26-38 ◽  
Author(s):  
Niranjan Phuyal
Keyword(s):  
Stock Market ◽  
Stock Prices ◽  
Emerging Market ◽  
Wald Test ◽  
Stock Market Index ◽  
Monthly Basis ◽  
Macroeconomic Variables ◽  
Long Run ◽  
Short Run

The quest of whether there is a long-run relation between macroeconomic variables and stock prices has found significant place in literature of finance. An existence of such relation would assure long-term investors a confidence in the market as long as the macroeconomic environment is sound. This study investigated using Johansen’s cointegration method, whether a long-term association of selected macroeconomic variables existed with stock prices in the emerging market like Nepali stock market. For this objective, monthly data from January 2003 to December 2012 were used with a set of six macroeconomic variables and stock market return. The results indicated that the Nepali stock market had a long run equilibrium relationship with a set of macroeconomic variables, like inflation rate, interest rate and remittance flow with the short term disequilibrium corrected by 1.79% on monthly basis. It further showed that there was Granger causality between them. In the short run, the stock market index was affected by the lag values of NEPSE index up to six levels and remittance income, as shown by Wald test. These findings hold practical implications for policy makers, stock market regulators, investors and stock market analysts.Journal of Business and Management Studies Vol.1(1) 2016: 26-38

scholarly journals Stock Prices of Renewable Energy Firms: Are There Asymmetric Responses to Oil Price Changes?

Economies ◽  
2018 ◽  
Vol 6 (4) ◽  
pp. 59 ◽  
Author(s):  
Donggyu Lee ◽  
Jungho Baek
Keyword(s):  
Renewable Energy ◽  
Stock Prices ◽  
Oil Prices ◽  
Oil Price ◽  
Price Changes ◽  
Distributed Lag ◽  
Autoregressive Distributed Lag ◽  
Crude Oil Prices ◽  
Long Run ◽  
Short Run

This article revisits the question of whether crude oil prices have a positive effect on stock the prices of renewable energy firms. To examine this question carefully, we allow for the asymmetric effects of oil price changes in our modeling process, using the nonlinear autoregressive distributed lag (ARDL) approach. We find that changes in oil prices indeed have a significant, positive short-run effect on renewable energy stock prices in an asymmetric manner. However, this short-run effect does not appear to last in the long-run.

The Impact of Monetary and Fiscal Policies on the Stock Market in the United States (U.S); Evidence from Linear ARDL Framework

2020 ◽  
Vol 11 (1) ◽  
pp. 132-132
Author(s):  
Aref Emamian
Keyword(s):  
United States ◽  
Stock Market ◽  
The United States ◽  
Real Effective Exchange Rate ◽  
Annual Data ◽  
Fiscal Policies ◽  
Long Run ◽  
The Us ◽  
Short Run ◽  
The Impact

This study examines the impact of monetary and fiscal policies on the stock market in the United States (US), were used. By employing the method of Autoregressive Distributed Lags (ARDL) developed by Pesaran et al. (2001). Annual data from the Federal Reserve, World Bank, and International Monetary Fund, from 1986 to 2017 pertaining to the American economy, the results show that both policies play a significant role in the stock market. We find a significant positive effect of real Gross Domestic Product and the interest rate on the US stock market in the long run and significant negative relationship effect of Consumer Price Index (CPI) and broad money on the US stock market both in the short run and long run. On the other hand, this study only could support the significant positive impact of tax revenue and significant negative impact of real effective exchange rate on the US stock market in the short run while in the long run are insignificant. Keywords: ARDL, monetary policy, fiscal policy, stock market, United States

Determinants of Total Factor Productivity in Mexico, Indonesia, Nigeria, and Turkey (1980–2014)

2018 ◽  
Vol 4 (2) ◽  
pp. 192-217 ◽  
Author(s):  
Phillip Akanni Olomola ◽  
Tolulope Temilola Osinubi
Keyword(s):  
Human Capital ◽  
Total Factor Productivity ◽  
Negative Relationship ◽  
Annual Data ◽  
Factor Productivity ◽  
Distributed Lag ◽  
Long Run ◽  
The World ◽  
Government Stability ◽  
Short Run

This study analyzed the macroeconomic and institutional determinants of total factor productivity (TFP) in the MINT (Mexico, Indonesia, Nigeria, and Turkey) countries during the period 1980–2014. Annual data covering the period between 1980 and 2014 were used. Data on real gross domestic product (real GDP), labor force, gross fixed capital formation, foreign direct investment (FDI), human capital, and inflation were sourced from the World Development Indicators published by the World Bank. Also, data on corruption, government stability, and law and order were obtained from the database of International Country Risk Guide. Panel autoregressive distributed lag (PARDL) regression technique was used to estimate the model. Results showed that TFP growth rate declined on average by 1.4 per cent and 1.8 per cent in Mexico and Turkey, respectively, while Indonesia and Nigeria did not experience productivity growth on the average. Results also showed that in the long run, human capital and government stability had positive and significant effects on TFP, while FDI and corruption had negative but significant effects on TFP. In the short run, there existed a significant negative relationship between TFP and inflation. However, the effects of human capital and corruption on TFP were positive and significant. The study concluded that human capital and corruption were key drivers of TFP in the MINT countries both in the long run and short run.

scholarly journals The long-Run and Short-Run Analysis between Stock Market Index and Macroeconomic Variables in Jordan: Bounds Tests Approach

2019 ◽  
Vol 12 (4) ◽  
pp. 50
Author(s):  
Raed Walid Al-Smadi ◽  
Muthana Mohammad Omoush
Keyword(s):  
Stock Market ◽  
Time Series Data ◽  
Stock Exchange ◽  
Series Data ◽  
Stock Market Index ◽  
Macroeconomic Variables ◽  
Market Index ◽  
Long Run ◽  
Equilibrium Relationship ◽  
Short Run

This paper investigates the long-run and short-run relationship between stock market index and the macroeconomic variables in Jordan. Annual time series data for the 1978&ndash;2017 periods and the ARDL bounding test are used. The results identify long-run equilibrium relationship between stock market index and the macroeconomic variables in Jordan. Jordanian policy makers have to pay more attention to the current regulation in the Amman Stock Exchange(ASE) and manage it well, thus ultimately helping financial development.

scholarly journals Effects of Exchange Rate and Inflation Rate on Stock Market Returns Volatility in India.

2020 ◽  
Author(s):  
Nenavath Sre ◽  
Suresh Naik
Keyword(s):  
Exchange Rate ◽  
Stock Market ◽  
Error Correction ◽  
Inflation Rate ◽  
Market Returns ◽  
Stock Market Returns ◽  
Positive Effects ◽  
Distributed Lag ◽  
Long Run ◽  
Short Run

Abstract The paper investigates the effect of exchange and inflation rate on stock market returns in India. The study uses monthly, quarterly and annual inflation and exchange rate data obtained from the RBI and market returns computed from the Indian share market index from January, 2000 to June, 2020.The paper uses the autoregressive distributed lag (ARDL) co-integration technique and the error correction parametization of the ARDL model for investigating the effect on Indian Stock markets. The GARCH and its corresponding Error Correction Model (ECM) were used to explore the long- and short-run relationship between the India Stock market returns, inflation, and exchange rate. The paper shows that there exists a long term relationship but there is no short-run relationship between Indian market returns and inflation. But, there is periodicity of inflation monthly considerable long run and short-run relationship between them existed. The outcome also illustrates a significant short-run relationship between NSE market returns and exchange rate. The variables were tested for short run and it was significantly shown the positive effects on the stock market returns and making it a desirable attribute of which investors can take advantage of. This is due to the establishment of long-run effect of inflation and exchange rate on stock market returns.

scholarly journals Relations and Emotions beyond the Boundaries in the Post Crisis Era – An Analysis of the Impact of Selected Variables on the Indian Stock Market

2018 ◽  
Vol 4 (8) ◽  
pp. 72
Author(s):  
Pooja Yadav ◽  
Nitin Huria
Keyword(s):  
Stock Market ◽  
Global Economy ◽  
Stock Index ◽  
Asia Pacific ◽  
Macroeconomic Variables ◽  
Long Run ◽  
Short Run ◽  
Current Scenario ◽  
Indian Stock Market ◽  
The Impact

From a decade or so Indian continent has become the centre of attraction in the global economies. This changed outlook is due to the fact that India embraces vast availability of resources and opportunities which makes it the most vibrant global economy in the current scenario of worldwide sluggishness. On this path of growth and prosperity India is showing stiff commitments and competitive edges with developed as well as emerging countries. To be more specific, during this voyage in the Asia pacific region recently on one side India has seen stronger bonding with some of its old mates like Japan but on the other part it has faced strain like situation from its stronger competitor contender china on the same time. Hence, in this context the main aim of this paper is to examine the long run and short run equilibrium impacts of Japan and Chinese stock index as well as macroeconomic variables impact on Indian stock market. This paper finds the presence of both long and short run equilibrium impacts from China and Japan to India. In case of Japanese financial market (Nikki 225) has a trivial negative but significant long run impact whereas, the Chinese stock index (SSE composite) is operating at the short run with the same mild negative but significant impact on the Indian stock market. The results of the impact of macroeconomic variables find the existence of long run as well as short run equilibrium from some of the selected variables on Indian stock market.

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