The Long Run Relationship Between Stock Indices and Macroeconomic Variables
Stock indices are considered to be the barometers of any economy. This study examines the long run equilibrium relationship between stock indices and macroeconomic variables by applying the Johansen and Juselius (1990) Vector Error Correction Framework. It considers sector indices of the Bombay Stoc...
| Main Authors: | , |
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| Format: | Article |
| Language: | English |
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Universiti Utara Malaysia
2015-12-01
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| Series: | The International Journal of Banking and Finance |
| Subjects: | |
| Online Access: | https://www.e-journal.uum.edu.my/index.php/ijbf/article/view/8484 |
| _version_ | 1797958182053609472 |
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| author | Yogesh Maheshwari KT Vigneswara Rao |
| author_facet | Yogesh Maheshwari KT Vigneswara Rao |
| author_sort | Yogesh Maheshwari |
| collection | DOAJ |
| description | Stock indices are considered to be the barometers of any economy. This study examines the long run equilibrium relationship between stock indices and macroeconomic variables by applying the Johansen and Juselius (1990) Vector Error Correction Framework. It considers sector indices of the Bombay Stock Exchange and select macroeconomic variables for this purpose. The empirical results reveal that the stock indices and the macroeconomic variables are cointegrated and possess a longrun equilibrium relationship. The relationship has been found to be significantly negative with the index of industrial production, rupee-dollar exchange rate, foreign exchange reserves and wholesale price index, but significantly positive with money supply. The results of the study would enable investors and traders in taking informed decisions. They would also help companies in developing a view on the economy so as to facilitate their financial planning process.
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| first_indexed | 2024-04-11T00:15:20Z |
| format | Article |
| id | doaj.art-65c39698eaf041338b65c6a9c6538c20 |
| institution | Directory Open Access Journal |
| issn | 2811-3799 2590-423X |
| language | English |
| last_indexed | 2024-04-11T00:15:20Z |
| publishDate | 2015-12-01 |
| publisher | Universiti Utara Malaysia |
| record_format | Article |
| series | The International Journal of Banking and Finance |
| spelling | doaj.art-65c39698eaf041338b65c6a9c6538c202023-01-09T03:08:08ZengUniversiti Utara MalaysiaThe International Journal of Banking and Finance2811-37992590-423X2015-12-0111The Long Run Relationship Between Stock Indices and Macroeconomic VariablesYogesh Maheshwari0KT Vigneswara Rao1Indian Institute of Management IndoveIndian Institute of Management IndoreStock indices are considered to be the barometers of any economy. This study examines the long run equilibrium relationship between stock indices and macroeconomic variables by applying the Johansen and Juselius (1990) Vector Error Correction Framework. It considers sector indices of the Bombay Stock Exchange and select macroeconomic variables for this purpose. The empirical results reveal that the stock indices and the macroeconomic variables are cointegrated and possess a longrun equilibrium relationship. The relationship has been found to be significantly negative with the index of industrial production, rupee-dollar exchange rate, foreign exchange reserves and wholesale price index, but significantly positive with money supply. The results of the study would enable investors and traders in taking informed decisions. They would also help companies in developing a view on the economy so as to facilitate their financial planning process. https://www.e-journal.uum.edu.my/index.php/ijbf/article/view/8484Sector indicesmacroeconomic variablesunit root testJohansen cointegration testvector error correction modellong run |
| spellingShingle | Yogesh Maheshwari KT Vigneswara Rao The Long Run Relationship Between Stock Indices and Macroeconomic Variables The International Journal of Banking and Finance Sector indices macroeconomic variables unit root test Johansen cointegration test vector error correction model long run |
| title | The Long Run Relationship Between Stock Indices and Macroeconomic Variables |
| title_full | The Long Run Relationship Between Stock Indices and Macroeconomic Variables |
| title_fullStr | The Long Run Relationship Between Stock Indices and Macroeconomic Variables |
| title_full_unstemmed | The Long Run Relationship Between Stock Indices and Macroeconomic Variables |
| title_short | The Long Run Relationship Between Stock Indices and Macroeconomic Variables |
| title_sort | long run relationship between stock indices and macroeconomic variables |
| topic | Sector indices macroeconomic variables unit root test Johansen cointegration test vector error correction model long run |
| url | https://www.e-journal.uum.edu.my/index.php/ijbf/article/view/8484 |
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