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Analysis of the impact of select macroeconomic variables on the Indian Stock Market: A heteroscedastic cointegration approach

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  • Naushad Alam

Abstract

The present study examines the impact of the macroeconomic variables on the stock prices in India. To fulfil the objective of the study monthly data of inflation, short term interest rate, long term interest rate, index of industrial production, exchange rate, money supply and the stock indices of CNX Nifty and BSE SENSEX was collected from March, 2005 to April, 2013.Heteroscedastic cointegration approach was employed using a Johansen test of cointegration, OLS and GARCH (1, 1) model to find out long term relationship between the selected macroeconomic variables and the stock prices. It is evident from the study that there exist long term heteroscedastic relationships between the stock prices and the macroeconomic variables chosen for the study. Further it is also evident from the study that while INF, MSE and the IIP are positively related to the stock prices and the SIR, LIR and the EXR are negatively related to the stock prices.

Suggested Citation

  • Naushad Alam, 2017. "Analysis of the impact of select macroeconomic variables on the Indian Stock Market: A heteroscedastic cointegration approach," Business and Economic Horizons (BEH), Prague Development Center, vol. 13(1), pages 119-127, March.
    • Handle: RePEc:pdc:jrnbeh:v:13:y:2017:i:1:p:119-127
    DOI: 10.15208/beh.2017.09
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    More about this item

    Keywords

    Stock market; India; macroeconomic variables; heteroscedastic cointegration;
    All these keywords.

    JEL classification:

    • G - Financial Economics
    • G - Financial Economics
    • E - Macroeconomics and Monetary Economics
    • E - Macroeconomics and Monetary Economics
    • F - International Economics

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