Stock Prices And Its Relation With Crude Oil Prices And Exchange Rates in India

S Seshaiah () and C. Behera
Authors registered in the RePEc Author Service: Chinmaya Behera and Suchismita Behera

Applied Econometrics and International Development, 2009, vol. 9, issue 1

Abstract: This paper analyzes empirically whether the exchange rates and crude oil prices have explanatory power over Indian Stock market prices or not. The data used for this study are daily stock price indexes of BSE Sensex, Crude oil price and exchange rates for the period 2nd January 1991 – 12th ,December 2007. Engel granger and cointegration tests, VECM and variance Decomposition tests were used in the study to explain the long run relations among variables questioned. Obtained results illustrate that stock price indexes are cointegrated with crude oil prices and exchange rates by providing direct long run equilibrium relation. Our results also indicate that the stock market prices are influenced by oil and exchange rate at lag -50 where as stock market prices are influenced by exchange rate only at lag-25. The results also indicates that the average real returns in the era of rupee depreciation are lesser than that of appreciation period.

Keywords: Keywords: Oil prices; Exchange Rates; Indian Stock Prices; Cointegration Tests (search for similar items in EconPapers)
Date: 2009
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Citations: View citations in EconPapers (5)

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