What drives the stock markets ? evidence from India

Anas Fadzil and Abul Masih

MPRA Paper from University Library of Munich, Germany

Abstract: This study wants to investigate what drives the stock markets. India was taken as a case study. The standard time series techniques were used. The macroeconomic variables used were industrial production index, wholesale price index and exchange rate. The results demonstrate that the stock markets and macroeconomic variables are cointegrated suggesting the existence of a long-run equilibrium relationship between stock markets and macroeconomic variables. The findings further tend to indicate that stock markets are driven mainly by the WPI, which represents Inflation followed by the exchange rate. Therefore, the policy makers should focus on the inflation rate and exchange rate to stabilize the stock markets.

Keywords: Stock Market Index; Macroeconomic Variables; VECM; VDC; India (search for similar items in EconPapers)
JEL-codes: C22 C58 E44 (search for similar items in EconPapers)
Date: 2018-12-15
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