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Macroeconomic variables and the performance of the Indian Stock Market

Author

Listed:
  • Naka, Atsuyuki

    (University of New Orleans)

  • Mukherjee, Tarun K.

    (University of New Orleans)

  • Tufte, David R.

    (University of New Orleans)

Abstract

In this paper we analyze relationships among selected macroeconomic variables and the Indian stock market. By employing a vector error correction model, we find that three long-term equilibrium relationships exist among these variables. Our results suggest that domestic inflation is the most severe deterrent to Indian stock market performance, and domestic output growth is its predominant driving force. After accounting for macroeconomic factors, the Indian market still appears to be drawn downward by a residual negative trend. We attribute this to economic mismanagement, since the size of the downward pull mitigates after 1990, coinciding with the beginning of Indian economic reforms.

Suggested Citation

  • Naka, Atsuyuki & Mukherjee, Tarun K. & Tufte, David R., 1998. "Macroeconomic variables and the performance of the Indian Stock Market," Working Papers 1998-06, University of New Orleans, Department of Economics and Finance.
    • Handle: RePEc:uno:wpaper:1998-06
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    Citations

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    Cited by:

    1. Alexander Schätz, 2010. "Macroeconomic Effects on Emerging Market Sector Indices," Journal of Emerging Market Finance, Institute for Financial Management and Research, vol. 9(2), pages 131-169, August.
    2. Sangita Choudhary, 2016. "Equity Investment Decisions: Determinants for Retail Investors," Jindal Journal of Business Research, , vol. 5(2), pages 131-144, December.

    More about this item

    Keywords

    India; Bombay Stock Exchange; Cointegration; Johansen method; Identification;
    All these keywords.

    JEL classification:

    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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