Literature Review
Apte (2001) investigated the relationship between the volatility of the stock market and the nominal exchange rate of India by using the EGARCH specifications on the daily closing USD/INR exchange rate, BSE 30 (Sensex) and NIFTY-50 over the period 1991 to 2000. The study suggests that there appears to be a spillover from the foreign exchange market to the stock market but not the reverse.
Bhattacharya and Mukharjee (2002) studied the nature of causal relation between the stock market, exchange rate, foreign exchange reserves and value of trade balance in India from 1990 to 2001 by applying the co-integration and long-run Granger Non-causality tests. The study suggests that there is no causal linkage between stock prices and the three variables under consideration.
To examine the dynamic linkages between the foreign exchange and stock markets for India, Nath and Samanta (2003) employed the Granger causality test on daily data during the period March 1993 to December 2002. The empirical findings of the study suggest that these two markets did not have any causal relationship. When the study extended its analysis to verify if liberalization in both the markets brought them together, it found no significant causal relationship between the exchange rate and stock price movements, except for the years 1993, 2001 and 2002 during when a unidirectional causal influence from stock index return to return in forex market is detected and a very mild causal influence in the reverse direction is found in some years such as 1997 and 2002.
Yamini Karmarkar and G Kawadia tried to investigate the relationship between RS/$ exchange rate and Indian stock markets. Five composite indices and five sectoral indices were studied over the period of one year: 2000. the results indicated that exchange rate has high correlation with the movement of stock markets.
Research Objectives
The present study is being contemplated with the following specific objectives:
i) Investigating the relationship between the foreign exchange market and stock market in India. To see that weather there is a significant relationship or dynamic linkage between the two markets.
ii) To find out which variable is leading and which variable is lagging. The lead-lag relationship illustrates how well the two markets are linked, and how fast one market reflects new information from the other. If relation between foreign exchange market and stock market exist, then it is possible that investor may use this information to predict the exchange rate movement or indices movement.
Hypothesis
H0: There is no significant relation between stock prices and exchange rates
H1: There is significant relation between stock prices and exchange rates
Research Design
The study type is Descriptive because this research helps to find out the meaning out of the secondary data, but not the cause-and-effect (causal) linkages among its different elements.
Download Full Project Report
Apte (2001) investigated the relationship between the volatility of the stock market and the nominal exchange rate of India by using the EGARCH specifications on the daily closing USD/INR exchange rate, BSE 30 (Sensex) and NIFTY-50 over the period 1991 to 2000. The study suggests that there appears to be a spillover from the foreign exchange market to the stock market but not the reverse.
Bhattacharya and Mukharjee (2002) studied the nature of causal relation between the stock market, exchange rate, foreign exchange reserves and value of trade balance in India from 1990 to 2001 by applying the co-integration and long-run Granger Non-causality tests. The study suggests that there is no causal linkage between stock prices and the three variables under consideration.
To examine the dynamic linkages between the foreign exchange and stock markets for India, Nath and Samanta (2003) employed the Granger causality test on daily data during the period March 1993 to December 2002. The empirical findings of the study suggest that these two markets did not have any causal relationship. When the study extended its analysis to verify if liberalization in both the markets brought them together, it found no significant causal relationship between the exchange rate and stock price movements, except for the years 1993, 2001 and 2002 during when a unidirectional causal influence from stock index return to return in forex market is detected and a very mild causal influence in the reverse direction is found in some years such as 1997 and 2002.
Yamini Karmarkar and G Kawadia tried to investigate the relationship between RS/$ exchange rate and Indian stock markets. Five composite indices and five sectoral indices were studied over the period of one year: 2000. the results indicated that exchange rate has high correlation with the movement of stock markets.
Research Objectives
The present study is being contemplated with the following specific objectives:
i) Investigating the relationship between the foreign exchange market and stock market in India. To see that weather there is a significant relationship or dynamic linkage between the two markets.
ii) To find out which variable is leading and which variable is lagging. The lead-lag relationship illustrates how well the two markets are linked, and how fast one market reflects new information from the other. If relation between foreign exchange market and stock market exist, then it is possible that investor may use this information to predict the exchange rate movement or indices movement.
Hypothesis
H0: There is no significant relation between stock prices and exchange rates
H1: There is significant relation between stock prices and exchange rates
Research Design
The study type is Descriptive because this research helps to find out the meaning out of the secondary data, but not the cause-and-effect (causal) linkages among its different elements.
Download Full Project Report
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