Analyzing the Impact of Demonetization on the Indian Stock Market: Sectoral Evidence using GARCH Model
On 8th November 2016, the Government of India demonetized its two highest currency notes in the denomination of Rs. 500 and Rs. 1000. The purpose of demonetization was to tackle the corruption and black money prevailing in the country. The stock market is one of the areas which pools a large amount...
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| Format: | Article |
| Language: | English |
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University of Wollongong
2018-07-01
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| Series: | Australasian Accounting, Business and Finance Journal |
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| Online Access: | http://ro.uow.edu.au/aabfj/vol12/iss2/7 |
| _version_ | 1819230385997873152 |
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| author | Patil Anoop Parab Narayan Y. V. Reddy |
| author_facet | Patil Anoop Parab Narayan Y. V. Reddy |
| author_sort | Patil Anoop |
| collection | DOAJ |
| description | On 8th November 2016, the Government of India demonetized its two highest currency notes in the denomination of Rs. 500 and Rs. 1000. The purpose of demonetization was to tackle the corruption and black money prevailing in the country. The stock market is one of the areas which pools a large amount of funds, the present study is an analytical attempt to examine the impact of demonetization on Indian stock market. For the purpose of the study, various statistical techniques have been used such as Graphical Analysis, Summary Statistics (i.e. Mean, Standard Deviation, Skewness, and Kurtosis), Augmented Dickey-Fuller Test and GARCH Model. The study utilizes the GARCH model to examine the impact of demonetization on Nifty 50 Index and across sectoral indices in India considering a period of 200 days prior and post event date by framing necessary dummy variables. The study found the data to be stationary using the Augmented Dickey-Fuller Test. A significant negative impact of demonetization on stock market returns was evidenced from Nifty 50 Index and sectoral indices such as Nifty Auto Index, Nifty Financial Services Index, Nifty FMCG Index, Nifty IT Index, Nifty Media Index, Nifty Private Bank Index, and Nifty Realty Index. The study found the Nifty Realty Index to be affected most because of demonetization. The results of the study will help the Governing bodies to examine the impact of demonetization and frame necessary policies. The results will also be useful for investors and other market participants for framing investment and trading strategies. |
| first_indexed | 2024-12-23T11:28:14Z |
| format | Article |
| id | doaj.art-dec4ae81845c4b24b0d637abd4e25695 |
| institution | Directory Open Access Journal |
| issn | 1834-2000 1834-2019 |
| language | English |
| last_indexed | 2024-12-23T11:28:14Z |
| publishDate | 2018-07-01 |
| publisher | University of Wollongong |
| record_format | Article |
| series | Australasian Accounting, Business and Finance Journal |
| spelling | doaj.art-dec4ae81845c4b24b0d637abd4e256952022-12-21T17:48:53ZengUniversity of WollongongAustralasian Accounting, Business and Finance Journal1834-20001834-20192018-07-0112210411610.14453/aabfj.v12i2.7Analyzing the Impact of Demonetization on the Indian Stock Market: Sectoral Evidence using GARCH ModelPatil Anoop0Parab Narayan1Y. V. Reddy2PG Student, Narayan Zantye College of Commerce, Bicholim, Goa, India. Research Scholar, Department of Commerce, Goa University, Goa, India.Goa University, India.On 8th November 2016, the Government of India demonetized its two highest currency notes in the denomination of Rs. 500 and Rs. 1000. The purpose of demonetization was to tackle the corruption and black money prevailing in the country. The stock market is one of the areas which pools a large amount of funds, the present study is an analytical attempt to examine the impact of demonetization on Indian stock market. For the purpose of the study, various statistical techniques have been used such as Graphical Analysis, Summary Statistics (i.e. Mean, Standard Deviation, Skewness, and Kurtosis), Augmented Dickey-Fuller Test and GARCH Model. The study utilizes the GARCH model to examine the impact of demonetization on Nifty 50 Index and across sectoral indices in India considering a period of 200 days prior and post event date by framing necessary dummy variables. The study found the data to be stationary using the Augmented Dickey-Fuller Test. A significant negative impact of demonetization on stock market returns was evidenced from Nifty 50 Index and sectoral indices such as Nifty Auto Index, Nifty Financial Services Index, Nifty FMCG Index, Nifty IT Index, Nifty Media Index, Nifty Private Bank Index, and Nifty Realty Index. The study found the Nifty Realty Index to be affected most because of demonetization. The results of the study will help the Governing bodies to examine the impact of demonetization and frame necessary policies. The results will also be useful for investors and other market participants for framing investment and trading strategies.http://ro.uow.edu.au/aabfj/vol12/iss2/7DemonetizationStock Market ReturnsSectoral IndicesGARCHDemonitisation |
| spellingShingle | Patil Anoop Parab Narayan Y. V. Reddy Analyzing the Impact of Demonetization on the Indian Stock Market: Sectoral Evidence using GARCH Model Australasian Accounting, Business and Finance Journal Demonetization Stock Market Returns Sectoral Indices GARCH Demonitisation |
| title | Analyzing the Impact of Demonetization on the Indian Stock Market: Sectoral Evidence using GARCH Model |
| title_full | Analyzing the Impact of Demonetization on the Indian Stock Market: Sectoral Evidence using GARCH Model |
| title_fullStr | Analyzing the Impact of Demonetization on the Indian Stock Market: Sectoral Evidence using GARCH Model |
| title_full_unstemmed | Analyzing the Impact of Demonetization on the Indian Stock Market: Sectoral Evidence using GARCH Model |
| title_short | Analyzing the Impact of Demonetization on the Indian Stock Market: Sectoral Evidence using GARCH Model |
| title_sort | analyzing the impact of demonetization on the indian stock market sectoral evidence using garch model |
| topic | Demonetization Stock Market Returns Sectoral Indices GARCH Demonitisation |
| url | http://ro.uow.edu.au/aabfj/vol12/iss2/7 |
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