ECONOMETRIC MODELING FOR INDIAN STOCK PRICES AND EXCHANGE RATES

Rajarathinam Arunachalam

Abstract


The present study examines the causal relationships between Indian stock price indices (Bombay and National Stock Exchange) and exchange rates of Indian rupees against US dollar, Japanese Yen, European currency and British currency. The study used the secondary daily time series data for the period from 3rd January, 2000 to 15th November, 2017. The results revealed that there was no co-integration between Indian stock prices and exchange rates. In the absence of long-term relationship between closing stock prices (Bombay and National Stock Exchanges) and exchange rates, it is attempted Granger Causality Test to find out any casual relationship between closing stock prices and exchange rates. The European and British currencies with Bombay Stock Prices showed bidirectional Granger causality and others showed unidirectional Granger causality for Bombay and National Stock Prices.


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ISSN : 2251-1555