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Insight of Indian sector indices for the post subprime crisis period: a vector error correction model approach

Author

Listed:
  • Vardhan, Harsh
  • Vij, Madhu
  • Sinha, Pankaj

Abstract

The empirical study highlights importance of usage of sector indices which provides insight for sector specific investment strategies and direction for suitable policy formulation. It investigates long run and short run relationships between eight identified sector indices and Sensex for the post subprime period from 04/09/2009 to 31/12/2010 using Vector Error Correction Model (VECM). Limited lead - lag short run relationships between sector indices were observed. Long term relationships between sector indices were determined by the usage of VECM indicating minimal benefits from diversifying investments to different sectors. Banking index played a predominant and integrating role in moving other indices. During this period of recovery; most sectors were protected and provided marginally better returns due to robust Banking policy. Realty & Metal were other significant drivers influencing remaining sectors contemporaneously.

Suggested Citation

  • Vardhan, Harsh & Vij, Madhu & Sinha, Pankaj, 2013. "Insight of Indian sector indices for the post subprime crisis period: a vector error correction model approach," MPRA Paper 49962, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:49962
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    File URL: https://mpra.ub.uni-muenchen.de/49962/1/MPRA_paper_49962.pdf
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    References listed on IDEAS

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    1. Theodore Syriopoulos, 2004. "International portfolio diversification to Central European stock markets," Applied Financial Economics, Taylor & Francis Journals, vol. 14(17), pages 1253-1268.
    2. Ahmed, Walid M.A., 2011. "Comovements and Causality of Sector Price Indices: Evidence from the Egyptian Stock Exchange," MPRA Paper 28127, University Library of Munich, Germany.
    3. Theophano Patra & Sunil Poshakwale, 2008. "Long-run and short-run relationship between the main stock indexes: evidence from the Athens stock exchange," Applied Financial Economics, Taylor & Francis Journals, vol. 18(17), pages 1401-1410.
    4. Bradley Ewing & Shawn Forbes & James Payne, 2003. "The effects of macroeconomic shocks on sector-specific returns," Applied Economics, Taylor & Francis Journals, vol. 35(2), pages 201-207.
    5. Sims, Christopher A & Stock, James H & Watson, Mark W, 1990. "Inference in Linear Time Series Models with Some Unit Roots," Econometrica, Econometric Society, vol. 58(1), pages 113-144, January.
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    Cited by:

    1. Vardhan, Harsh & Sinha, Pankaj, 2015. "Influence of Macroeconomic Variable on Indian Stock Movement: Cointegration Approach," MPRA Paper 64369, University Library of Munich, Germany, revised 10 May 2015.

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    More about this item

    Keywords

    Vector Error Correction Model (VECM); Sector Index; Generalized Impulse Response Function (GIRF).;
    All these keywords.

    JEL classification:

    • B22 - Schools of Economic Thought and Methodology - - History of Economic Thought since 1925 - - - Macroeconomics
    • C0 - Mathematical and Quantitative Methods - - General
    • C01 - Mathematical and Quantitative Methods - - General - - - Econometrics
    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • E60 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - General
    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation

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