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Asian Journal of Management
Year : 2018, Volume : 9, Issue : 4
First page : ( 1337) Last page : ( 1341)
Print ISSN : 0976-495X. Online ISSN : 2321-5763.
Article DOI : 10.5958/2321-5763.2018.00212.3

Effect of Exchange Rates Volatility on Stock Market Performance

Dr. Manu K S1,*, Prof. Bhaskar Padma2

1Assistant Professor, Department of Management Studies, Christ (Deemed to be University), Bengaluru

2Associate Professor, Department of MBA, BNM Institute of Technology, Bengaluru

*Corresponding Author E-mail: manu.ks@christuniversity.in

Online published on 30 January, 2019.

Abstract

Capital market growth and foreign exchange rate stability are paramount for any country's economic development. International investors places an important role in interconnecting the relationship between exchange rates and stock market growth. The study pertains to analyze the effect of exchange rate volatility on performance of stock markets. The study selected four exchange rates (EURO/INR, USD/INR, GBP/INR and YEN/INR) and three stock indices of BSE (SENSEX, BSE 500) and NSE (Nifty 50). The study used GARCH model to analyze the effect of exchange rate volatility. Overall, the study found great influence of exchange rate volatility on performance stock indices. Fluctuation of exchange rates have an impact on prices of the stock index on the immediate next day. Market participants are suggested to consider immediate previous day's exchange rate volatality in order to take better trading decision.

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Keywords

International Investors, GARCH Model, Exchange Rate Volatility and Trading Decision.

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