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Nexus between Crude Oil, Exchange Rate and Stock Market Returns: An Empirical Evidence from Indian Context

Author

Listed:
  • Guntur Anjana Raju

    (Professor, Goa Business School, Goa University, Goa, India)

  • Sanjeeta Shirodkar

    (Assistant Professor, Goa Business School, Goa University, Goa, India,)

  • Shripad Ramchandra Marathe

    (Research Scholar (Goa Business School) and Assistant Professor (Swami Vivekanand VM s College of Commerce), BoriPonda, Goa, India.)

Abstract

Crude oil is considered as a major resource of any developing country it may be either Oil importing or exporting countries. The present study examines the relationship between the Exchange rate, Crude oil and Stock market returns. The study analyse the monthly observations from April 1, 2003 to March 31, 2019 with the help of Co integration, Granger causality, Variance Decomposition. The overall findings of the study indicate a significant effect of Crude oil on USD/INR Exchange rate. Theoretically, an oil price shock may be transmitted as the collapse in Crude prices pushes down the domestic price of non-traded products and hence the real Exchange rate and returns from Stock Market.

Suggested Citation

  • Guntur Anjana Raju & Sanjeeta Shirodkar & Shripad Ramchandra Marathe, 2021. "Nexus between Crude Oil, Exchange Rate and Stock Market Returns: An Empirical Evidence from Indian Context," International Journal of Energy Economics and Policy, Econjournals, vol. 11(3), pages 170-175.
    • Handle: RePEc:eco:journ2:2021-03-21
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    References listed on IDEAS

    as
    1. Basher, Syed Abul & Haug, Alfred A. & Sadorsky, Perry, 2012. "Oil prices, exchange rates and emerging stock markets," Energy Economics, Elsevier, vol. 34(1), pages 227-240.
    2. Masih, Rumi & Peters, Sanjay & De Mello, Lurion, 2011. "Oil price volatility and stock price fluctuations in an emerging market: Evidence from South Korea," Energy Economics, Elsevier, vol. 33(5), pages 975-986, September.
    3. Roger D. Huang & Ronald W. Masulis & Hans R. Stoll, 1996. "Energy shocks and financial markets," Journal of Futures Markets, John Wiley & Sons, Ltd., vol. 16(1), pages 1-27, February.
    4. Dhaoui, Abderrazak & Khraief, Naceur, 2014. "Empirical linkage between oil price and stock market returns and volatility: Evidence from international developed markets," Economics Discussion Papers 2014-12, Kiel Institute for the World Economy (IfW Kiel).
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    1. Taufeeque Ahmad Siddiqui & Haseen Ahmed & Mohammad Naushad & Uzma Khan, 2023. "The Relationship between Oil Prices and Exchange Rate: A Systematic Literature Review," International Journal of Energy Economics and Policy, Econjournals, vol. 13(3), pages 566-578, May.

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    More about this item

    Keywords

    Crude Oil; Exchange rate; Stock Market returns; Co-integration; Variance Decomposition;
    All these keywords.

    JEL classification:

    • E3 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles
    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • Q4 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy

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