Foreign Institutional Investment and Stock Market Volatility in India: An Empirical Analysis
The two major capital market reforms of (i) entry of Foreign Institutional Investors (FIIs) in Indian stock market (ii) permission to Indian companies for raising capital from foreign stock exchanges by means of American Depository Receipts (ADRs) / Global Depository Receipts (GDRs). Further introduction of two-way fungibility in these instruments of ADRs / GDRs leads to reduction of the sovereignty of Indian stock market. As such, Indian stock market now, is not only sensitive to national events but also more sensitive to international events. Due to the speculative motive of FIIs investment, investment by FIIs is subject to frequent reversals. Volatility is a measure of how far the current price of an asset deviates from its average past prices. Investors demand higher risk premium as a compensation for increased risk due to volatility. A higher risk premium implies higher cost of capital and thus lowers investment. The prevailing inefficiency in emerging securities markets including India further magnifies the problem of volatility. In this paper, an effort is made to predict stock return volatility and contribution of FIIs investment to that volatility using high frequency data (daily data).
If 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.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
When requesting a correction, please mention this item's handle: RePEc:jge:journl:348. See general 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: (Dr J K Sachdeva)
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.