Academy of Accounting and Financial Studies Journal (Print ISSN: 1096-3685; Online ISSN: 1528-2635)


Dynamic Relations Between Foreign Exchange Rate and Indian Stock Market: A Variance Decomposition Analysis with Var Method

Author(s): Nenavath Sreenu, KS Sekhar Rao, Sonal Trivedi,

The primary objective of this paper is to forecast the dynamic behaviour of finance and economic time series. It also intends to look into the interrelation between stock market price and conversion rate in the Indian context. The study - used quarterly data from January 2000 to December 2019 and has employed different econometrics methods like; unit root test, variance decomposition under vector autoregressive (VAR) method, and Granger causality. The VAR model was used to study the long term and short-term relationship. The result shows that in the short-term price of stock market values and conversion rate have an affirmative impact which has high statistical significance. In long term, the correlation of the prices of stock market values and conversion rate is negative but has no statistical significance.

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