IDEAS home Printed from https://ideas.repec.org/a/asi/aeafrj/v5y2015i10p1119-1133id1428.html
   My bibliography  Save this article

Dynamic Relations between Macroeconomic Variables and Indian Stock Price: An Application of ARDL Bounds Testing Approach

Author

Listed:
  • Pooja Joshi
  • A K Giri

Abstract

The purpose of the present study is to examine the dynamic long run and the short run relationship between stock price and a set of macroeconomic variables for Indian economy using monthly data from April 2004 to July 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 (VDC) is also used to explore how much the forecast error variance of a conditional stock market volatility is explained by the innovations to each explanatory conditional macroeconomic variables. The results confirm a long run co-integrating relationship among the variables. Evidence suggests that the Index of Industrial Production, inflation and exchange rate influence stock prices positively, whereas, gold price influences the stock price negatively. The VECM result indicates that only long run causality running from all the variables used in the study 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.

Suggested Citation

  • Pooja Joshi & A K Giri, 2015. "Dynamic Relations between Macroeconomic Variables and Indian Stock Price: An Application of ARDL Bounds Testing Approach," Asian Economic and Financial Review, Asian Economic and Social Society, vol. 5(10), pages 1119-1133.
    • Handle: RePEc:asi:aeafrj:v:5:y:2015:i:10:p:1119-1133:id:1428
    as

    Download full text from publisher

    File URL: https://archive.aessweb.com/index.php/5002/article/view/1428/2064
    Download Restriction: no
    ---><---

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:asi:aeafrj:v:5:y:2015:i:10:p:1119-1133:id:1428. See general information about how to correct material in RePEc.

    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.

    We have no bibliographic references for this item. You can help adding them by using 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 RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Robert Allen (email available below). General contact details of provider: https://archive.aessweb.com/index.php/5002/ .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.