Impact of FII Investments on Stock Market Volatility and Foreign Exchange Reserves: The Indian Experience
AbstractVolatility refers to the amount of uncertainty or risk about the size of changes in a security's value. The increased interest of foreign institutional investors (FIIs) in Indian equity market has been correlated frequently with the volatility in stock markets in India. This paper investigates the nature of the causal relationship between Net FII flows, the Stock Price Movements, and Foreign Exchange Reserves (FERs). The unit root test was applied to ascertain stationarity of the time series data and then by applying the Granger Causality Test, the causal relationships using monthly data for the 20 years period was tested. The results show that there is bi-directional Granger Causality between BSE (Bombay Stock Exchange) Sensex and FII Flows. Thus FII Flows are Granger Caused by BSE Sensex and BSE Sensex is Granger Caused by FII Flows. The FERs do Granger Cause BSE Sensex but BSE Sensex does not Granger Cause FERs. There is bi-directional Granger Causality between FERs and FII Flows. Thus FII flows Granger cause FERs and similarly FERs Granger Cause FII Flows.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoArticle provided by Ottawa United Learning Academy in its journal Transnational Corporations Review.
Volume (Year): 5 (2013)
Issue (Month): 3 (September)
Contact details of provider:
Postal: 1568 Merivale Rd. Suite # 618, Ottawa, Ontario, Canada K2G 5Y7
Foreign institutional investments; stock market; foreign exchange reserves; unit root test; granger causality test;
You can help add them by filling out this form.
reading list or among the top items on IDEAS.Access and download statisticsgeneral information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Denny Liao) or (Jen Ma).
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.