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On the Relationship between Stock Prices and Exchange Rates for India

Paresh Kumar Narayan

School of Accounting, Economics and Finance, Faculty of Business and Law, Deakin University, 221 Burwood Highway, Burwood, Victoria 3125, Australia

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https://doi.org/10.1142/S0219091509001630Cited by:12 (Source: Crossref)

Abstract

In this paper, we apply several variants of the EGARCH model to examine the role of depreciation of the Indian rupee on India's stock market returns using daily data. Our findings suggest that volatility persistence has been high; depreciation of the rupee has increased volatility; and asymmetric volatility confirms that negative shocks generate more volatility than positive shocks. We also find that an appreciation of the Indian rupee over the 2002 to 2006 has generated more returns and less volatility.

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