Dynamic Relationship Between Stock Market, Market Capitalization and Net FII Investments in India

By: Material type: ArticleArticleLanguage: ENG Series: ; 13Publication details: Aug 2007 0Edition: 8Description: 60-67 PpSubject(s): DDC classification:
  •  Tri
Online resources: Summary: Globalization and liberalization have brought dramatic changes in the financial sector of Indian economy. India has emerged as an important destination for global investment. Keeping this in view, the present study examines the dynamic relationship between stock market, market capitalization and net FII investment in India during the period from June 2002 to June 2005 by using Granger Causality Test and Vector Auto Regression Model. The results indicate that there is a unidirectional causal relationship between market capitalization and stock market, net FII investment with stock market. Again the VAR analysis shows that stock return and market capitalization have an impact over net FII investment in the expected direction over a short horizon.
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Globalization and liberalization have brought dramatic changes in the financial sector of Indian economy. India has emerged as an important destination for global investment. Keeping this in view, the present study examines the dynamic relationship between stock market, market capitalization and net FII investment in India during the period from June 2002 to June 2005 by using Granger Causality Test and Vector Auto Regression Model. The results indicate that there is a unidirectional causal relationship between market capitalization and stock market, net FII investment with stock market. Again the VAR analysis shows that stock return and market capitalization have an impact over net FII investment in the expected direction over a short horizon.

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