alexa The Impact of Macroeconomic Fundamentals on Stock Prices Revisited: Evidence from Indian Data
Business & Management

Business & Management

Journal of Stock & Forex Trading

Author(s): Pramod Kumar NAIK, Puja PADHI

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The study investigates the relationships between th e Indian stock market index (BSE Sensex) and five macroeconomic variables, namely, i ndustrial production index, wholesale price index, money supply, treasury bills rates and exchange rates over the period 1994:04–2011:06. Johansen’s co-integrati on and vector error correction model have been applied to explore the long-run equ ilibrium relationship between stock market index and macroeconomic variables. The analysis reveals that macroeconomic variables and the stock market index are co-integrated and, hence, a long-run equilibrium relationship exists between them. It is observed that the stock prices positively relate to the money supply and industrial production but negatively relate to inflation. The exchange rate a nd the short-term interest rate are found to be insignificant in determining stock prices. In the Granger causality sense, macroeconomic variable causes the stock pric es in the long-run but not in the short-run. There is bidirectional causality exists between industrial production and stock prices whereas, unidirectional causality from money supply to stock price, stock price to inflation and interest rates to stoc k prices are found

  • Open Access
This article was published in Eurasian Journal of Business and Economics and referenced in Journal of Stock & Forex Trading

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