Vanita Tripathi - Academia.edu (original) (raw)
Papers by Vanita Tripathi
SSRN Electronic Journal, 2000
ABSTRACT In order to make higher education system teaching- learning process more effective it is... more ABSTRACT In order to make higher education system teaching- learning process more effective it is necessary to understand the learning styles of the students so that teaching process can be suitably adapted or modified. This paper examines the learning styles of 320 first year post graduate students at Department of Commerce, University of Delhi. We also examine if there is a significant relationship between learning styles and academic performance. The study uses the standard Learning styles questionnaire developed by Kolb (1984) and cross tabulation and Chi square test to analyse the results. We find that the top learning style is Diverging (Feel and Watch/Listen) followed by Accommodating (Feel and Do) and Assimilating (Think and Watch). The least preferred learning style is Converging (Think and Do). There is no significant difference in learning style of male and female students. However, there is a significant association between Course and Learning style. Most of the professional course students are Accommodators (Doer) as against Divergers (Watcher) and Assimilators (Thinkers) in academic course. We found that students Learning style and Academic performance are significantly related. Among top scorers we find mostly Assimilators or Divergers while among the lowest scorers the percentage of Accommodators is high. The findings of the study have important implications for students, teachers and other stakeholders in higher education system.
Real economic growth of a nation is supported by its financial sector. This paper examines the re... more Real economic growth of a nation is supported by its financial sector. This paper examines the relationship between real and financial sectors of India, an advanced emerging market of the world, over the period 2004-2014. Domestic credit and BSE Stock market capitalization are taken as proxy of financial sector development while real economy is represented by GDP. The data has been analyzed using ADF unit root test, Granger causality test, Auto Regressive Distributed Lag (ARDL) model, LM serial correlation test, CUSUM test and Johansen Cointegration test to capture the nature of relation amongst these sectors in Indian context.
We find that while market capitalization granger causes GDP, domestic credit does not granger cause GDP. We find no causality from the real economy (GDP) to financial sector (BSE Capitalization and Domestic Credit). ARDL and Johansen Cointegration Test results reveal that GDP is significantly explained by its own past values (both short and long run) as well as long run values of domestic credit and thus points towards the existence of long term cointegrating association between GDP and domestic credit while the absence of same between GDP and BSE capitalization.
These results have significant inferences for economists, regulators and policy makers. So, even though Stock market reforms are a prerequisite for building investor confidence and accelerating real economic growth in short term, banking sector reforms is the key for sustaining it in the long term. We find evidence of supply leading hypothesis whereby economic growth is lead and caused by financial sector in short run (through stock market) and in long run (through banking sector).
The Arbitrage Pricing Theory (APT) propounded by Ross in 1976 argued for a variety of macroeconom... more The Arbitrage Pricing Theory (APT) propounded by Ross in 1976 argued for a variety of macroeconomic variables (sources of systematic risk) in explaining stock returns. In the same vein, this paper examines the relationship between macroeconomic variables (GDP, inflation, interest rate, exchange rate, money supply, and oil prices) and aggregate stock returns in BRICS markets over the period 1995-2014 using quarterly data. We have applied Auto Regressive Distributed Lag (ARDL) model to document such a relationship for individual countries as well as for panel data. Contrary to general belief, we find that GDP and inflation are not found to be significantly affecting stock returns in most of BRICS markets mainly because Stock returns generally tend to lead rather than follow GDP and inflation. In line with the theory and literature, we find significant negative impact of interest rate, exchange rate and oil prices on stock returns and a positive impact of money supply. This study would be a valuable addition to the growing body of empirical literature on the subject besides being useful to policy makers, regulators and investment community. Policy makers and regulator should watch out for impact of fluctuations in exchange rate, interest rate, money supply, and oil prices on volatility in their stock markets. Investor can search for arbitrage opportunities in BRICS markets on the basis of these variables but not the basis of GDP or inflation.
Journal of Advances in Management Research, 2015
In this paper we examine if there is any overreaction effect present in Indian Stock market. We h... more In this paper we examine if there is any overreaction effect present in Indian Stock market. We have used monthly closing adjusted prices of 500 stocks comprising S&P CNX 500 Equity Index over the period March, 1996 to March, 2007 and methodology as proposed by De Bondt and Thaler (1985) and Chan (1988). Our findings reveal a presence of statistically significant but asymmetric overreaction effect in Indian stock market. Contrarian investment strategy has been found to be economically feasible, generating abnormally positive returns on market-adjusted as well as risk-adjusted basis which are largely attributable to the extremely positive returns to loser stocks during the test period. Our findings cast serious objections against the informational efficiency of Indian stock market suggesting that investors can earn superior returns by making use of the information on past prices of securities.
The present article examines the short-term return effect (in the domestic market) of internation... more The present article examines the short-term return effect (in the domestic market) of international listing of stocks by six pharmaceutical and chemical companies in India using conventional event study methodology, dummy variable regression and a t-test. The sample comprises of pharmaceutical and chemical companies which went for foreign listing on the New York Stock Exchange (NYSE) or the Luxemburg Stock Exchange over the period 1994–2010. The test window is ±20 days around the date of listing abroad. We find that in respect of Pharmaceutical companies international listing does not result in any substantial short-term positive effect on stock returns. The average abnormal returns (AARs) of Pharmaceutical companies have been found to be positive and statistically significant only on the ninth day before listing and thirteenth day after listing. It is not significant on the listing date. These results are confirmed by dummy variable regression and a t-test, which shows that pharma ...
This paper examines the short run and long run inter linkages of the Indian stock market with tho... more This paper examines the short run and long run inter linkages of the Indian stock market with those of Advanced emerging markets viz. Brazil, Hungary, Taiwan, Mexico, Poland and South Africa over the period ranging from 1 January 1992 to 31 December 2009 using Johansen co-integration test and Granger’s causality test. The analysis of daily data shows that the short run and long run inter linkages of the Indian stock market with these markets has increased over the study period. Unidirectional causality is found in most cases. The findings have important implications for investment and speculative decisions.
Besides market risk, banking stocks are also subject to interest rate risk due to the simple fact... more Besides market risk, banking stocks are also subject to interest rate risk due to the simple fact that banking profitability is a function of prevailing interest rate. This paper examines the effects of interest rate changes on banking stock returns in India using the multivariate OLS and GARCH estimation models over the period 1st April 1996-31st March 2011. The sample consists of 18 commercial bank stocks comprising BANKEX listed on Bombay stock exchange. We find a negative but weak relationship between Bank stock returns and interest rate changes in India. As expected banking stock returns exhibit significant positive relationship with market returns. However interest rate volatility is found to affect significantly the stock volatility in case of most of the banks in India. Hence although interest rate movements may not significantly affect banking stock returns in India but stock’s volatility is significantly affected by the interest rate volatility. These results have importan...
In a first of its kind, this paper examines the issue of sectoral efficiency of the Indian Stock... more In a first of its kind, this paper examines the issue of sectoral efficiency of the Indian Stock Market. For this, daily data for 11sectoral indices on NSE viz. Auto, Bank, Energy, Finance, FMCG, IT, Media, Metal, Pharma, PSU Banks, and Realty Index have been used. The study period spans from Jan 2004 to Jan 2014 covering a comprehensive 10 years including the recent global financial crisis. The analysis is done using unit root tests [Augmented Dickey Fuller (ADF), Phillips-Perron (PP) and Kwiatkowski-Phillips-Schmidt-Shin (KPSS)]and Variance ratio tests [Chow Denning Joint Test, LoMackinlay Test and Wright (2000) Test based on Ranks and Signs]. The results suggest that although overall Indian stock market seems to be weak form efficient, but different sectors comprising it are not, especially during total study period. Further we find evidence of increased inefficiency in Bank, Metal, PSU Bank and Realty sectors in the post-crisis period. This may be due to investor’s overreaction in Indian stock market. Tripathi & Aggarwal (2009) have reported that Indian investors tend to overreact to bad news and hence post-crisis, the price discovery mechanism was not so efficient. The findings on sectoral efficiency in India have important implications for policy makers, mutual funds, portfolio managers and investors at large. Weak form inefficiency in Bank, Metal, PSU Bank and Realty sectors is suggestive of exploitable arbitrage opportunities in these sectors. The regulators and policy makers must also note that overall market efficiency may not imply efficiency at the sectoral level; for this, more efforts and sector specific reforms need to be taken.
Stocks are generally considered to be a good hedge against inflation because of their tendency to... more Stocks are generally considered to be a good hedge against inflation because of their tendency to move together. This paper examines long term relationship between inflation and stock returns in BRICS markets using panel data for the period from March 2000 to September 2013. Correlation results reveal a significant negative relationship between stock index and inflation rate for Russia and a significantly positive relationship for India & China. ADF, PP and KPSS unit root tests indicate non-stationary characteristic of the data. Further we find no long term co-integrating relationship between stock index values and inflation rates using Pedroni panel co integration test. These findings have important implications for policy makers, regulators and investment community at large. There may seem to be short term contemporaneous relationship between inflation and equity returns but in the long run they do not seem to be significantly integrated. Changes in inflation may bring some short run movement in stock return but certainly equity does not seem to be a good hedge against inflation in long run at least in emerging BRICS markets.
The last decade has witnessed increasing popularity of debt instruments among foreign institution... more The last decade has witnessed increasing popularity of debt instruments among foreign institutional investors. As the sudden withdrawal of foreign institutional investment can weaken the currency and worsen the economic situation, a proper understanding of the determinants of these flows is essential. Previous work on the determinants of FII has been conducted in the context of equity market only where equity return is found to be the major determinant of these flows. In a first of its kind, this paper examines the determinants of FII in Indian debt market. We use monthly data of FII flows and financial as well as macro economic variables such as Exchange rate, IIP, WPI, Bond Yield, stock return and risk for the period Apr 2000 to Sep 2012. Correlation Analysis, Multivariate Regression Analysis and Principal Component Analysis are used to identify major determinants of FII in Indian debt market. The impact of Global financial crisis has also been examined using dummy variable regres...
Global Business Review
There has been an extensive debate on the relationship between real economy and stock market perf... more There has been an extensive debate on the relationship between real economy and stock market performance especially in the context of emerging markets. This paper examines the causal relationships between the stock market performance and select macro economic variables in India, one of the advanced emerging markets using monthly data for the period starting from July 1997 to June 2011. We use Correlation, Factor analysis to detect the problem of Multicollinearity among the explanatory variables, ADF and PP Unit root stationarity test, Regression, ARCH test to check for heteroskedasticity, Granger Causality test to examine the short term causal relation and Johansen Co-integration test to examine the bi-variate and multi-variate long term relation. Impulse Response analysis has also been performed to check the response of stock market indicators to shocks created in the real economy with the help of graphs. Monthly index values of BSE Sensex are used as a proxy for aggregate stock re...
SSRN Electronic Journal, 2000
SSRN Electronic Journal, 2000
ABSTRACT This paper examines the long run and short run dynamics among oil prices, exchange rates... more ABSTRACT This paper examines the long run and short run dynamics among oil prices, exchange rates and stock prices in India (one of the fastest growing emerging markets in the world) over the most recent 15 year period 1997-2011. Using Johansen’s Co integration test we find the existence of long run equilibrium relationship among oil market, foreign exchange market and stock market in India. The short term dynamics among the three markets are analyzed using Vector Autoregression (unrestricted as well as VECM), VAR causality/Block Exogeneity Wald test and Impulse response analysis. We find unidirectional causality from stock market to oil market. An impulse originating in foreign exchange market results in a profound drop in stock as well as oil prices and is statistically significant for about three weeks in oil market and two weeks in stock market. The domino effect of up-waves in stock market is positive for oil market and remains statistically significant for few weeks, while being of opposite tendency in foreign exchange market. The optimism of oil market bulls up stock market in India while creating bearish trends in foreign exchange market. An assessment of impulse response graphs in pre-crisis, during crisis and post crisis period exhibits that the riposte of all the variables to a shock generating from within stays for a relatively longer period during crisis as compared to pre and post crisis period. These results have wider implications for market integration, policy makers and investors at large. Since these markets are integrated rather than segmented, from the perspective of investments, risk reduction cannot be achieved in the long run by holding assets from these markets in the same portfolio. However diversification opportunities are not ruled out in the short run. Stock market turns out to be the leader in all the three markets especially after the recent financial crisis. Rapidly rising stock prices in India signal the expectation of higher economic growth ahead. If the stock prices get trapped in a bubble, however, oil prices will overshoot in relation to economic fundamentals.
SSRN Electronic Journal, 2000
SSRN Electronic Journal, 2000
SSRN Electronic Journal, 2000
ABSTRACT FDI in India has – in a lot of ways – enabled India to achieve a certain degree of finan... more ABSTRACT FDI in India has – in a lot of ways – enabled India to achieve a certain degree of financial stability, growth and development. According to Ernst and Young's 2010 European Attractiveness Survey, India is ranked as the fourth most attractive foreign direct investment destination in 2010. The factors that attracted investment in India are stable economic policies, availability of cheap and quality human resources, and opportunities of new unexplored markets. Mostly FDI are flowing in service sector and manufacturing sector recorded very low investments. Besides these factors, there are a number of macroeconomic factors that are expected to affect FDI in India. This paper examines the relationship between FDI and six macroeconomic factors – Exchange rate (Rs. per $), Inflation (WPI), GDP/IIP (proxy for Market size), Interest rate (91days T-bills), Trade Openness and S&P 500 Index (profitability) using monthly and quarterly data for the period starting from July 1997 to December 2011. Besides using the standard techniques such as ADF and PP Unit root stationarity test, Bi-variate and Multi-variate Regression analysis and Granger Causality test, we use advanced econometric techniques such as Johansen’s Co-integration test, Vector Auto Regression (VAR) and Impulse Response analysis to check for long run and short run dynamic relationship. We find a significant correlation between FDI and macroeconomic factors (except for Exchange rate). Regarding causality results IIP/GDP, WPI and S&P 500 Index are granger causing FDI inflows in India, Trade Openness is granger caused by the same. All the macroeconomic variables considered (except Exchange rate) are significantly affecting FDI inflows and the overall explanatory power of the regression model is 75.7%. The results of Johansen’s Co-integration test reveal that there is long run causal relation between FDI and IIP; FDI and S&P 500, FDI and Trade Openness and FDI and WPI. This implies that select macroeconomic factors have direct long run equilibrium relationship with FDI. Vector Autoregression and Impulse response analysis show that FDI is caused more by its own lagged values rather than past values of other macroeconomic factors. A shock generated in real economy (IIP or GDP, Exchange rate and Interest rate) has a negative effect on FDI inflows which lasts for about two months, while the response of FDI to shocks created in foreign trade policy and stock market is positive and significant. The research findings have important implications for policy makers and foreign investors. Policy makers need to push reform agenda in domestic market so as to attract more FDI in the Indian economy. Since, there is positive relationship between FDI and stock returns, a higher investor’s confidence in domestic market acts as a stimulus in attracting FDI inflows.
SSRN Electronic Journal, 2000
ABSTRACT This paper examines the inter-linkages and long run integration of Indian economy with o... more ABSTRACT This paper examines the inter-linkages and long run integration of Indian economy with other economies of the world (US, Europe, Other Emerging markets and World economy) using standard indices of MSCI over the period Jan 2003 to July 2012. We also investigate Indian economy’s response to recent global turbulence (i.e. US subprime crisis and European Debt crisis) and its preparedness to counter global shocks. We use Granger causality test, Johansen co-integration test and Impulse response analysis of Vector auto regression framework to test various hypotheses. We find contagion effect on Indian economy. Although post US subprime crisis there is no observed causal relationship between India and other economies, but post European debt crisis, the Indian economy is granger caused by all other economies. Further during pre US subprime crisis period, India did have a long term co-integrating relationship with all other economies but this co integration almost disappeared in post US subprime crisis as well as post European debt crisis period. This low level of co integration despite the presence of short run causal relationship shows that global shocks might destabilize Indian economy in long run. Especially, Impulse response analysis revealed that Indian economy seems to be immune from the shocks created in the other economies of the world for atleast first two months and negative effects appear after that only. These results have important policy implications. The policy makers need to understand that if domestic economic fundamentals of India are in order, then global shocks have very less destabilizing effect on Indian economy. Key Words: Global financial crisis, Inter linkages, Granger Causality, Johansen Co integration test, Impulse Response analysis, US subprime crisis, European debt crisis. JEL classification: G10, G11, G14, G15
SSRN Electronic Journal, 2000
SSRN Electronic Journal, 2000
ABSTRACT In order to make higher education system teaching- learning process more effective it is... more ABSTRACT In order to make higher education system teaching- learning process more effective it is necessary to understand the learning styles of the students so that teaching process can be suitably adapted or modified. This paper examines the learning styles of 320 first year post graduate students at Department of Commerce, University of Delhi. We also examine if there is a significant relationship between learning styles and academic performance. The study uses the standard Learning styles questionnaire developed by Kolb (1984) and cross tabulation and Chi square test to analyse the results. We find that the top learning style is Diverging (Feel and Watch/Listen) followed by Accommodating (Feel and Do) and Assimilating (Think and Watch). The least preferred learning style is Converging (Think and Do). There is no significant difference in learning style of male and female students. However, there is a significant association between Course and Learning style. Most of the professional course students are Accommodators (Doer) as against Divergers (Watcher) and Assimilators (Thinkers) in academic course. We found that students Learning style and Academic performance are significantly related. Among top scorers we find mostly Assimilators or Divergers while among the lowest scorers the percentage of Accommodators is high. The findings of the study have important implications for students, teachers and other stakeholders in higher education system.
Real economic growth of a nation is supported by its financial sector. This paper examines the re... more Real economic growth of a nation is supported by its financial sector. This paper examines the relationship between real and financial sectors of India, an advanced emerging market of the world, over the period 2004-2014. Domestic credit and BSE Stock market capitalization are taken as proxy of financial sector development while real economy is represented by GDP. The data has been analyzed using ADF unit root test, Granger causality test, Auto Regressive Distributed Lag (ARDL) model, LM serial correlation test, CUSUM test and Johansen Cointegration test to capture the nature of relation amongst these sectors in Indian context.
We find that while market capitalization granger causes GDP, domestic credit does not granger cause GDP. We find no causality from the real economy (GDP) to financial sector (BSE Capitalization and Domestic Credit). ARDL and Johansen Cointegration Test results reveal that GDP is significantly explained by its own past values (both short and long run) as well as long run values of domestic credit and thus points towards the existence of long term cointegrating association between GDP and domestic credit while the absence of same between GDP and BSE capitalization.
These results have significant inferences for economists, regulators and policy makers. So, even though Stock market reforms are a prerequisite for building investor confidence and accelerating real economic growth in short term, banking sector reforms is the key for sustaining it in the long term. We find evidence of supply leading hypothesis whereby economic growth is lead and caused by financial sector in short run (through stock market) and in long run (through banking sector).
The Arbitrage Pricing Theory (APT) propounded by Ross in 1976 argued for a variety of macroeconom... more The Arbitrage Pricing Theory (APT) propounded by Ross in 1976 argued for a variety of macroeconomic variables (sources of systematic risk) in explaining stock returns. In the same vein, this paper examines the relationship between macroeconomic variables (GDP, inflation, interest rate, exchange rate, money supply, and oil prices) and aggregate stock returns in BRICS markets over the period 1995-2014 using quarterly data. We have applied Auto Regressive Distributed Lag (ARDL) model to document such a relationship for individual countries as well as for panel data. Contrary to general belief, we find that GDP and inflation are not found to be significantly affecting stock returns in most of BRICS markets mainly because Stock returns generally tend to lead rather than follow GDP and inflation. In line with the theory and literature, we find significant negative impact of interest rate, exchange rate and oil prices on stock returns and a positive impact of money supply. This study would be a valuable addition to the growing body of empirical literature on the subject besides being useful to policy makers, regulators and investment community. Policy makers and regulator should watch out for impact of fluctuations in exchange rate, interest rate, money supply, and oil prices on volatility in their stock markets. Investor can search for arbitrage opportunities in BRICS markets on the basis of these variables but not the basis of GDP or inflation.
Journal of Advances in Management Research, 2015
In this paper we examine if there is any overreaction effect present in Indian Stock market. We h... more In this paper we examine if there is any overreaction effect present in Indian Stock market. We have used monthly closing adjusted prices of 500 stocks comprising S&P CNX 500 Equity Index over the period March, 1996 to March, 2007 and methodology as proposed by De Bondt and Thaler (1985) and Chan (1988). Our findings reveal a presence of statistically significant but asymmetric overreaction effect in Indian stock market. Contrarian investment strategy has been found to be economically feasible, generating abnormally positive returns on market-adjusted as well as risk-adjusted basis which are largely attributable to the extremely positive returns to loser stocks during the test period. Our findings cast serious objections against the informational efficiency of Indian stock market suggesting that investors can earn superior returns by making use of the information on past prices of securities.
The present article examines the short-term return effect (in the domestic market) of internation... more The present article examines the short-term return effect (in the domestic market) of international listing of stocks by six pharmaceutical and chemical companies in India using conventional event study methodology, dummy variable regression and a t-test. The sample comprises of pharmaceutical and chemical companies which went for foreign listing on the New York Stock Exchange (NYSE) or the Luxemburg Stock Exchange over the period 1994–2010. The test window is ±20 days around the date of listing abroad. We find that in respect of Pharmaceutical companies international listing does not result in any substantial short-term positive effect on stock returns. The average abnormal returns (AARs) of Pharmaceutical companies have been found to be positive and statistically significant only on the ninth day before listing and thirteenth day after listing. It is not significant on the listing date. These results are confirmed by dummy variable regression and a t-test, which shows that pharma ...
This paper examines the short run and long run inter linkages of the Indian stock market with tho... more This paper examines the short run and long run inter linkages of the Indian stock market with those of Advanced emerging markets viz. Brazil, Hungary, Taiwan, Mexico, Poland and South Africa over the period ranging from 1 January 1992 to 31 December 2009 using Johansen co-integration test and Granger’s causality test. The analysis of daily data shows that the short run and long run inter linkages of the Indian stock market with these markets has increased over the study period. Unidirectional causality is found in most cases. The findings have important implications for investment and speculative decisions.
Besides market risk, banking stocks are also subject to interest rate risk due to the simple fact... more Besides market risk, banking stocks are also subject to interest rate risk due to the simple fact that banking profitability is a function of prevailing interest rate. This paper examines the effects of interest rate changes on banking stock returns in India using the multivariate OLS and GARCH estimation models over the period 1st April 1996-31st March 2011. The sample consists of 18 commercial bank stocks comprising BANKEX listed on Bombay stock exchange. We find a negative but weak relationship between Bank stock returns and interest rate changes in India. As expected banking stock returns exhibit significant positive relationship with market returns. However interest rate volatility is found to affect significantly the stock volatility in case of most of the banks in India. Hence although interest rate movements may not significantly affect banking stock returns in India but stock’s volatility is significantly affected by the interest rate volatility. These results have importan...
In a first of its kind, this paper examines the issue of sectoral efficiency of the Indian Stock... more In a first of its kind, this paper examines the issue of sectoral efficiency of the Indian Stock Market. For this, daily data for 11sectoral indices on NSE viz. Auto, Bank, Energy, Finance, FMCG, IT, Media, Metal, Pharma, PSU Banks, and Realty Index have been used. The study period spans from Jan 2004 to Jan 2014 covering a comprehensive 10 years including the recent global financial crisis. The analysis is done using unit root tests [Augmented Dickey Fuller (ADF), Phillips-Perron (PP) and Kwiatkowski-Phillips-Schmidt-Shin (KPSS)]and Variance ratio tests [Chow Denning Joint Test, LoMackinlay Test and Wright (2000) Test based on Ranks and Signs]. The results suggest that although overall Indian stock market seems to be weak form efficient, but different sectors comprising it are not, especially during total study period. Further we find evidence of increased inefficiency in Bank, Metal, PSU Bank and Realty sectors in the post-crisis period. This may be due to investor’s overreaction in Indian stock market. Tripathi & Aggarwal (2009) have reported that Indian investors tend to overreact to bad news and hence post-crisis, the price discovery mechanism was not so efficient. The findings on sectoral efficiency in India have important implications for policy makers, mutual funds, portfolio managers and investors at large. Weak form inefficiency in Bank, Metal, PSU Bank and Realty sectors is suggestive of exploitable arbitrage opportunities in these sectors. The regulators and policy makers must also note that overall market efficiency may not imply efficiency at the sectoral level; for this, more efforts and sector specific reforms need to be taken.
Stocks are generally considered to be a good hedge against inflation because of their tendency to... more Stocks are generally considered to be a good hedge against inflation because of their tendency to move together. This paper examines long term relationship between inflation and stock returns in BRICS markets using panel data for the period from March 2000 to September 2013. Correlation results reveal a significant negative relationship between stock index and inflation rate for Russia and a significantly positive relationship for India & China. ADF, PP and KPSS unit root tests indicate non-stationary characteristic of the data. Further we find no long term co-integrating relationship between stock index values and inflation rates using Pedroni panel co integration test. These findings have important implications for policy makers, regulators and investment community at large. There may seem to be short term contemporaneous relationship between inflation and equity returns but in the long run they do not seem to be significantly integrated. Changes in inflation may bring some short run movement in stock return but certainly equity does not seem to be a good hedge against inflation in long run at least in emerging BRICS markets.
The last decade has witnessed increasing popularity of debt instruments among foreign institution... more The last decade has witnessed increasing popularity of debt instruments among foreign institutional investors. As the sudden withdrawal of foreign institutional investment can weaken the currency and worsen the economic situation, a proper understanding of the determinants of these flows is essential. Previous work on the determinants of FII has been conducted in the context of equity market only where equity return is found to be the major determinant of these flows. In a first of its kind, this paper examines the determinants of FII in Indian debt market. We use monthly data of FII flows and financial as well as macro economic variables such as Exchange rate, IIP, WPI, Bond Yield, stock return and risk for the period Apr 2000 to Sep 2012. Correlation Analysis, Multivariate Regression Analysis and Principal Component Analysis are used to identify major determinants of FII in Indian debt market. The impact of Global financial crisis has also been examined using dummy variable regres...
Global Business Review
There has been an extensive debate on the relationship between real economy and stock market perf... more There has been an extensive debate on the relationship between real economy and stock market performance especially in the context of emerging markets. This paper examines the causal relationships between the stock market performance and select macro economic variables in India, one of the advanced emerging markets using monthly data for the period starting from July 1997 to June 2011. We use Correlation, Factor analysis to detect the problem of Multicollinearity among the explanatory variables, ADF and PP Unit root stationarity test, Regression, ARCH test to check for heteroskedasticity, Granger Causality test to examine the short term causal relation and Johansen Co-integration test to examine the bi-variate and multi-variate long term relation. Impulse Response analysis has also been performed to check the response of stock market indicators to shocks created in the real economy with the help of graphs. Monthly index values of BSE Sensex are used as a proxy for aggregate stock re...
SSRN Electronic Journal, 2000
SSRN Electronic Journal, 2000
ABSTRACT This paper examines the long run and short run dynamics among oil prices, exchange rates... more ABSTRACT This paper examines the long run and short run dynamics among oil prices, exchange rates and stock prices in India (one of the fastest growing emerging markets in the world) over the most recent 15 year period 1997-2011. Using Johansen’s Co integration test we find the existence of long run equilibrium relationship among oil market, foreign exchange market and stock market in India. The short term dynamics among the three markets are analyzed using Vector Autoregression (unrestricted as well as VECM), VAR causality/Block Exogeneity Wald test and Impulse response analysis. We find unidirectional causality from stock market to oil market. An impulse originating in foreign exchange market results in a profound drop in stock as well as oil prices and is statistically significant for about three weeks in oil market and two weeks in stock market. The domino effect of up-waves in stock market is positive for oil market and remains statistically significant for few weeks, while being of opposite tendency in foreign exchange market. The optimism of oil market bulls up stock market in India while creating bearish trends in foreign exchange market. An assessment of impulse response graphs in pre-crisis, during crisis and post crisis period exhibits that the riposte of all the variables to a shock generating from within stays for a relatively longer period during crisis as compared to pre and post crisis period. These results have wider implications for market integration, policy makers and investors at large. Since these markets are integrated rather than segmented, from the perspective of investments, risk reduction cannot be achieved in the long run by holding assets from these markets in the same portfolio. However diversification opportunities are not ruled out in the short run. Stock market turns out to be the leader in all the three markets especially after the recent financial crisis. Rapidly rising stock prices in India signal the expectation of higher economic growth ahead. If the stock prices get trapped in a bubble, however, oil prices will overshoot in relation to economic fundamentals.
SSRN Electronic Journal, 2000
SSRN Electronic Journal, 2000
SSRN Electronic Journal, 2000
ABSTRACT FDI in India has – in a lot of ways – enabled India to achieve a certain degree of finan... more ABSTRACT FDI in India has – in a lot of ways – enabled India to achieve a certain degree of financial stability, growth and development. According to Ernst and Young's 2010 European Attractiveness Survey, India is ranked as the fourth most attractive foreign direct investment destination in 2010. The factors that attracted investment in India are stable economic policies, availability of cheap and quality human resources, and opportunities of new unexplored markets. Mostly FDI are flowing in service sector and manufacturing sector recorded very low investments. Besides these factors, there are a number of macroeconomic factors that are expected to affect FDI in India. This paper examines the relationship between FDI and six macroeconomic factors – Exchange rate (Rs. per $), Inflation (WPI), GDP/IIP (proxy for Market size), Interest rate (91days T-bills), Trade Openness and S&P 500 Index (profitability) using monthly and quarterly data for the period starting from July 1997 to December 2011. Besides using the standard techniques such as ADF and PP Unit root stationarity test, Bi-variate and Multi-variate Regression analysis and Granger Causality test, we use advanced econometric techniques such as Johansen’s Co-integration test, Vector Auto Regression (VAR) and Impulse Response analysis to check for long run and short run dynamic relationship. We find a significant correlation between FDI and macroeconomic factors (except for Exchange rate). Regarding causality results IIP/GDP, WPI and S&P 500 Index are granger causing FDI inflows in India, Trade Openness is granger caused by the same. All the macroeconomic variables considered (except Exchange rate) are significantly affecting FDI inflows and the overall explanatory power of the regression model is 75.7%. The results of Johansen’s Co-integration test reveal that there is long run causal relation between FDI and IIP; FDI and S&P 500, FDI and Trade Openness and FDI and WPI. This implies that select macroeconomic factors have direct long run equilibrium relationship with FDI. Vector Autoregression and Impulse response analysis show that FDI is caused more by its own lagged values rather than past values of other macroeconomic factors. A shock generated in real economy (IIP or GDP, Exchange rate and Interest rate) has a negative effect on FDI inflows which lasts for about two months, while the response of FDI to shocks created in foreign trade policy and stock market is positive and significant. The research findings have important implications for policy makers and foreign investors. Policy makers need to push reform agenda in domestic market so as to attract more FDI in the Indian economy. Since, there is positive relationship between FDI and stock returns, a higher investor’s confidence in domestic market acts as a stimulus in attracting FDI inflows.
SSRN Electronic Journal, 2000
ABSTRACT This paper examines the inter-linkages and long run integration of Indian economy with o... more ABSTRACT This paper examines the inter-linkages and long run integration of Indian economy with other economies of the world (US, Europe, Other Emerging markets and World economy) using standard indices of MSCI over the period Jan 2003 to July 2012. We also investigate Indian economy’s response to recent global turbulence (i.e. US subprime crisis and European Debt crisis) and its preparedness to counter global shocks. We use Granger causality test, Johansen co-integration test and Impulse response analysis of Vector auto regression framework to test various hypotheses. We find contagion effect on Indian economy. Although post US subprime crisis there is no observed causal relationship between India and other economies, but post European debt crisis, the Indian economy is granger caused by all other economies. Further during pre US subprime crisis period, India did have a long term co-integrating relationship with all other economies but this co integration almost disappeared in post US subprime crisis as well as post European debt crisis period. This low level of co integration despite the presence of short run causal relationship shows that global shocks might destabilize Indian economy in long run. Especially, Impulse response analysis revealed that Indian economy seems to be immune from the shocks created in the other economies of the world for atleast first two months and negative effects appear after that only. These results have important policy implications. The policy makers need to understand that if domestic economic fundamentals of India are in order, then global shocks have very less destabilizing effect on Indian economy. Key Words: Global financial crisis, Inter linkages, Granger Causality, Johansen Co integration test, Impulse Response analysis, US subprime crisis, European debt crisis. JEL classification: G10, G11, G14, G15
SSRN Electronic Journal, 2000