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Influence of Foreign Institutional Investments (FIIs) on the Indian Stock Market: An Insight by VAR Models

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  • Harsh Vardhan
  • Pankaj Sinha

Abstract

The study examines the influence of foreign institutional investments (FIIs) on the Indian equity market and its role in integration with the United States (US) equity market. Different vector autoregression (VAR) models have been employed for sub-periods created by the structural breaks. Despite global recessionary conditions, both purchase and sales of FIIs have steadily increased. The FII inflows and outflows are significantly influenced by the domestic equity market. The exchange rate has no effect on FII inflows; however, outflows are influenced by its change. The US equity market has no influence on FIIs’ inflows but has marginal impact on the outflows. JEL Classification: C58, C54, G23, G18, G15

Suggested Citation

  • Harsh Vardhan & Pankaj Sinha, 2016. "Influence of Foreign Institutional Investments (FIIs) on the Indian Stock Market: An Insight by VAR Models," Journal of Emerging Market Finance, Institute for Financial Management and Research, vol. 15(1), pages 49-83, April.
  • Handle: RePEc:sae:emffin:v:15:y:2016:i:1:p:49-83
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    Keywords

    Foreign institutional investments (FIIs); structural change; VAR;

    JEL classification:

    • C58 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Financial Econometrics
    • C54 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Quantitative Policy Modeling
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors
    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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