Fluctuations in Crude, Gold & Forex Prices and its Impact on Stock Market: Evidence from Sensex and Nifty 50
Keywords:
GARCH (1,1), Granger’s Casualty, Nifty 50, Brent Crude, ADF statistics, Normal GaussianAbstract
Stock markets particularly in developing economies like India play a vital role in overall development of the economy. However, volatility in stock market leads to uncertainty in the economy which in turn hampers the overall development of the economy. Most of the time, the stock market seems to respond irrationally to a new macro and micro economic information and making it too difficult to predict. Therefore, the current empirical paper tried to investigate three major macro-economic indicators such as crude, gold and forex (Dollar) on the performance of the stock market. In order to realise the stated objectives the researcher has collected the daily data from 2000 to 2017. The collected data has been tested for stationarity by running ADF statistics and the lag length for each variable is chosen by using the AIC. Later, a robust multiple regression model has been run to ascertain the impact of the chosen variables on Indian benchmark indices. The volatility of the Sensex has been measured by applying GARCH (1,1) model. Apart from that the study concludes that the Forex, Gold and Crude prices were significant in the transmission of volatility of the chosen indices and have the competency to transmit shock on Sensex and Nifty50. Finally, these results have been compared to the available evidence.
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