Abstract
Foreign investment is a major factor to determine volatility in the stock market. To discover the influence on Stock Market volatility of foreign investment we have considered FE, FD, and FDI as proxy variables of foreign investment and Indian stock market volatility is represented by Indian vix. The period for this study is 2009 to 2017 (monthly data). To address this issue of volatility in the long/short-run we have applied the ARDL. The preference given to the ARDL model over Johansen co-integration is to the difference in the order of integration among the variables. ARDL model allows us to combine the I(0) and I(1) series whereas I(1) required in the case of Johansen approach. Results of unit root confirm the I(0)/I(1) order of integration, which allows us to apply the ADRL bound test. F-statistics is higher than the upper bound critical value at 10%, 5% and providing the evidence of co-integration among variables at a 5% level of significance. Hence, there is a long-run relationship amid the variables. Long-run form results show the negative sign of the coefficient and it is significant. The ECM value is (-0.9671) and it confirms that nearly 96.71 % of the inaccuracy rose in each period and automatically corrected in specified time period.
Highlights
Numerous studies were drawn to study and analyze the influence of macro-economic elements on Stock-Market index and the majority of them were generally attended towards industrialized economies along with the impact of these macro-economic elements on the Stock –Market index in countries where the development is low.The Stock market considers an effective source in mobilizing money as well as assigning of saved resources amid competitors which interprets decisive for development and effectiveness economy (Unkoro & Uko, 2013). (Siliverstovs & Duong, 2006) investigated the interrelationships among the Stock market, GDP and rate of interest in five (5) European nations, namely, Germany, France, Italy, Netherlands, and the UK
The Indian Stock Market volatility (Indian volatility index) in India is explained from three independent variables of foreign equity (FE), foreign debt (FD) and foreign direct investment (FDI)
This study investigates the long-run and short-run relationship between Indian vix, foreign direct investment (FDI), foreign equity and foreign debt in India
Summary
Numerous studies were drawn to study and analyze the influence of macro-economic elements on Stock-Market index and the majority of them were generally attended towards industrialized economies along with the impact of these macro-economic elements on the Stock –Market index in countries where the development is low.The Stock market considers an effective source in mobilizing money as well as assigning of saved resources amid competitors which interprets decisive for development and effectiveness economy (Unkoro & Uko, 2013). (Siliverstovs & Duong, 2006) investigated the interrelationships among the Stock market, GDP and rate of interest in five (5) European nations, namely, Germany, France, Italy, Netherlands, and the UK. (Siliverstovs & Duong, 2006) investigated the interrelationships among the Stock market, GDP and rate of interest in five (5) European nations, namely, Germany, France, Italy, Netherlands, and the UK They concluded that there exists a favorable correlation among stock prices and GDP in aforesaid nations. (Sehgal & Tripathi, 2009) calculated that if Foreign Institutional Investors (FIIs) assume favorable response and flocked strategies in the Indian environment, FIIs reveal about return chasing patterns while using monthly data. Though, it pretends to be working on the affirmative opinion if used daily files. Their results have tough inferences for domestic FIs, portfolio managers, wealth managers and other investors along with regulations of market who want to have a healthier perspective of FII's pattern as later are the leading investors in the Indian equity market
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