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What drives the stock markets ? evidence from India

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  • Fadzil, Anas
  • Masih, Mansur

Abstract

This study wants to investigate what drives the stock markets. India was taken as a case study. The standard time series techniques were used. The macroeconomic variables used were industrial production index, wholesale price index and exchange rate. The results demonstrate that the stock markets and macroeconomic variables are cointegrated suggesting the existence of a long-run equilibrium relationship between stock markets and macroeconomic variables. The findings further tend to indicate that stock markets are driven mainly by the WPI, which represents Inflation followed by the exchange rate. Therefore, the policy makers should focus on the inflation rate and exchange rate to stabilize the stock markets.

Suggested Citation

  • Fadzil, Anas & Masih, Mansur, 2018. "What drives the stock markets ? evidence from India," MPRA Paper 109248, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:109248
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    References listed on IDEAS

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    More about this item

    Keywords

    Stock Market Index; Macroeconomic Variables; VECM; VDC; India;
    All these keywords.

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • C58 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Financial Econometrics
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy

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