TITLE:
Is Stock Prices and Economic Activity in India Co-Integrated?
AUTHORS:
G. P. Girish, S. Vijayalakshmi
KEYWORDS:
Stock Prices, India, IIP, Co-Integration, Industrial Production
JOURNAL NAME:
Theoretical Economics Letters,
Vol.6 No.2,
April
27,
2016
ABSTRACT: In this study we investigate whether stock prices
and economic activity in India are co-integrated by using monthly data from
1960 to 2013 and applying high-powered co-integration tests which have an
inherent advantage of permitting structural changes in the relationships being
tested and in asymmetric co-integration, along with frequently applied
co-integration tests of Engle and Granger (1987) and Johansen (1988). The
results of the study provide empirical evidence for reasonably saying that
stock prices and economic activity in India are co-integrated and validate the
prediction in financial economics literature.