RELATIONSHIP BETWEEN STOCK, FOREIGN EXCHANGE AND COMMODITY MARKETS –A STUDY IN THE INDIAN CONTEXT
During the last three decades, the financial markets across the globe have become highly integrated with each other as well as with the markets in other countries. This inter-relationship has thrown open lot of investment opportunities, but, has also resulted in increased risk. The same applies to Indian markets too. In the light of increased integration between various markets, the current study attempts to analyse three major markets in India, namely, the stock market, foreign exchange market and commodity market. Nifty, the fifty share index of National Stock Exchange is considered to represent the stock market, while exchange rate of US Dollar is used for representing the foreign exchange market and gold and crude oil are included from the commodity market. Data related to these markets were collected for a period of ten years from 2008 to 2018. Annual rates of returns, daily returns, and volatility of returns as well as Granger Causality test were applied to draw conclusions about the nature of relationship among the markets. It was found that stock market and gold provided comparatively better returns, crude oil showed highest level of risk. Unidirectional causality was found between stock market and foreign exchange market, gold and foreign exchange, foreign exchange and crude oil, stock market and crude oil and gold and crude oil. No signs of causality were seen between stock market and gold.
Büyüksalvarci A, and Abdioglu H. (2010). ‘The Causal Relationship between Stock Prices and Macroeconomic Variables: A Case Study for Turkey’, International Journal of Economic Perspectives, Vol.4(4), pp. 601-610.
Fama EF. (1981). “Stock Returns, Real Activity, Inflation, and Money”, The American Economic Review, Vol.71(4), pp.545-565.
Ingalhalli V, Poornima BG, and Reddy YV. (2016). “A Study on Dynamic Relationship Between Oil, Gold, Forex and Stock Markets in Indian Context”, Paradigm, Vol. 20(1), pp.1-9.
Jain A, and Ghosh S. (2012). “Dynamics of global oil prices, exchange rate and precious metal prices in India”, Resources Policy, Vol.38, pp.88–93.
Patel S. (2012). “The effect of Macroeconomic Determinants on the Performance of the Indian Stock Market”, NMIMS Management Review, Vol XXII, pp.117-127.
Ray S. (2012). “Testing Granger Causal Relationship between Macroeconomic Variables and Stock Price Behaviour: Evidence from India”, Advances in Applied Economics and Finance (AAEF), Vol.3(1), pp.470-481.
Sahu TN, Bandopadhyay K, and Mondal D. (2014). “An empirical study on the dynamic relationship between oil prices and Indian stock market”, Managerial Finance, Vol.40(2), pp.200-215.
Sujit KS, and Rajesh B. (2011). “Study On Dynamic Relationship Among Gold Price, Oil Price, Exchange Rate and Stock Market Returns”, International Journal of Applied Business and Economic Research, Vol.9(2), pp.145-165.
- There are currently no refbacks.
Send mail to firstname.lastname@example.org with questions or comments about this web site.
International Journal of Management and Social Sciences, All rights reserved.