Stock prices and its relation with crude oil prices and exchange rates

• S. Venkata Seshaiah ^[1] ; Chinmaya Behera ^[1]
  1. [1] Hyderabad
• Localización: Applied econometrics and international development, ISSN 1578-4487, Vol. 9, Nº. 1, 2009, págs. 149-161
• Idioma: inglés
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• Resumen

  • 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 2 nd 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.