Causal Nexus between Stock Price, Demand for Money, Interest Rate, Foreign Institutional Investment, and Exchange Rates in India: A Post Subprime Crisis Analysis

Vyas, Iti; Prasad, Narayan; Mishra, Alok

doi:10.21002/icmr.v3i2.3625

Cited by 1 publication

(3 citation statements)

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“…The relationship between stock prices and macroeconomic dynamics has been studied extensively (Al‐Awadhi, Al‐Saifi, Al‐Awadhi, & Alhamadi, 2020; Ali, Alam, & Rizvi, 2020; Dhingra, Gandhi, & Bulsara, 2016; Ichev & BakerMarinc, 2018; Jain & Biswal, 2016; Katechos, 2011; Li, Su, Chang, & Ma, 2018; Lin & Fu, 2016; Mallick & Mishra, 2019; Mishra, 2004; Mishra, Rath, & Dash, 2020; Vyas, 2014; Vyas & Mishra, 2016; Vyas, Prasad, & Mishra, 2011; Wong, 2017). From these studies, the impact of pandemics (see Al‐Awadhi et al, 2020; Ali et al, 2020; Ichev & BakerMarinc, 2018) gold and crude oil prices (see Jain & Biswal, 2016) demand for money, short term interest rate, net foreign equity flows, and the exchange rate (See Dhingra et al, 2016; Mishra, 2004; Vyas, 2014; Vyas et al, 2011; Vyas & Mishra, 2016) are shown to influence India's stock market. The second strand of studies shows stock prices are driven by operating earnings, dividend, book value and net profit in the US market (Collins, 1957).…”

Section: Introductionmentioning

confidence: 99%

“…The relationship between stock prices and macroeconomic dynamics has been studied extensively (Al-Awadhi, Al-Saifi, Al-Awadhi, & Alhamadi, 2020;Ali, Alam, & Rizvi, 2020;Dhingra, Gandhi, & Bulsara, 2016;Ichev & BakerMarinc, 2018;Jain & Biswal, 2016;Katechos, 2011;Li, Su, Chang, & Ma, 2018;Lin & Fu, 2016;Mallick & Mishra, 2019;Mishra, 2004;Mishra, Rath, & Dash, 2020;Vyas, 2014;Vyas & Mishra, 2016;Vyas, Prasad, & Mishra, 2011;Wong, 2017).…”

mentioning

confidence: 99%

“…From these studies, the impact of pandemics (see Al-Awadhi et al, 2020;Ali et al, 2020;Ichev & BakerMarinc, 2018) gold and crude oil prices (see Jain & Biswal, 2016) demand for money, short term interest rate, net foreign equity flows, and the exchange rate (See Dhingra et al, 2016;Mishra, 2004;Vyas, 2014;Vyas et al, 2011;Vyas & Mishra, 2016) are shown to influence India's stock market.…”

mentioning

confidence: 99%

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Forecasting stock prices of five major commercial banks in India and stress testing: A multivariate approach

Mallick

Mishra

Vyas

2020

Journal of Public Affairs

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This study explains a novel glide path to model the stock prices of five major commercial banks in India. The purpose of this work is concerned with identifying the macroeconomic drivers of stock prices of five core banks listed in NIFTY50 index, namely, SBI, HDFC, ICICI, INDUSIND and KOTAK MAHINDRA, and to test their stability during periods of fiscal tension. The study utilized a Principal Component Analysis (PCA) of the respective stock prices and has proceeded with the multivariate method to make the required predictions. The choice of statistical technique primarily consists of decomposing the respective stock prices of the five banks using PCA and then selecting one optimal Principal Component (PC1). A multivariate regression model is employed to predict the optimal PC of such stock prices in which PC1 is the dependent variable and NIFTY50 and INR‐USD is the independent variables. Ultimately, the optimal PC is returned to the stock prices of the corresponding levels. The model is set up to be performed comfortably and the hardiness of the model is supported from various selection criteria; particular, the model assumption testing, goodness of fit, sample stressed period (using Rolling Average method on Indian VIX: 2008:Q1 to 2009:Q2) testing and out of sample performance. In addition to this, the estimated results are consistent with Monte‐Carlo simulation results. The envisioned model satisfies the model objective, while sufficiently capturing the historical dynamics of the stock prices as reflected by various performance indicators (RMSE, MAPE, RMSE over standard deviation) presented in this paper.

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