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Agricultural Commodities and FMCG Stock Prices in India: Evidence from the ARDL Bound Test and the Toda and Yamamoto Causality Analysis

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  • Gursimran Kaur
  • Babli Dhiman

Abstract

This article is an attempt to study the cointegration and causality between agricultural commodities and Fast Moving Consumer Goods (FMCG) stock index in India for the period January 2007 to December 2017. Autoregressive distributive lag (ARDL) bound test is applied to investigate the cointegration between the variables used. The findings indicate the absence of cointegration between National Commodity and Derivative Exchange (NCDEX) agricultural commodities and National Stock Exchange (NSE) FMCG index. Besides, the Toda and Yamamoto approach of Granger causality test is employed to study causal relationship between variables under study. It confirms the absence of causal relationship between NCDEX agricultural commodities and NSE FMCG index except barley, cottonseed, jeera, mustard seed and wheat. This test finally confirms the unidirectional causal relationship runs from barley, cottonseed, jeera, mustard seed and wheat to NSE FMCG index. Therefore, in case of absence of cointegration and causality between agricultural commodities and NSE FMCG index, investors can hedge their risk by diversifying portfolio in both the markets.

Suggested Citation

  • Gursimran Kaur & Babli Dhiman, 2021. "Agricultural Commodities and FMCG Stock Prices in India: Evidence from the ARDL Bound Test and the Toda and Yamamoto Causality Analysis," Global Business Review, International Management Institute, vol. 22(5), pages 1190-1201, October.
    • Handle: RePEc:sae:globus:v:22:y:2021:i:5:p:1190-1201
    DOI: 10.1177/0972150919830803
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