Articles
DYNAMIC LINKAGES BETWEEN US AND INDIAN EQUITY MARKETS: AN EMPIRICAL STUDY

Asha Rani and Sunaina Kanojia

Volume 40, Issue 2 (Jul - Dec)

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In this study, we attempt to investigate the dynamic linkages between US and Indian equity market particularly after the Global Financial Crisis. The daily closing value of total return indices from both the equity markets is examined for a period of more than 15 years ending March 2019. These indices are not found to be co-integrated. An analysis of returns from these equity markets using ADCC-GARCH model reveals the linkage between the volatilities of the two markets. However, the degree of these association between the volatilities are time-varying and has been found to have reduced for past three years paving the way for equity investors of both the markets for seeking the advantage of international diversification.

IMPACT OF MACRO ECONOMIC VARIABLES ON INDIA'S STOCK MARKET: A DYNAMIC OLS APPROACH

Rakesh Shahani and Bhavya Vashisth

Volume 40, Issue 2 (Jul - Dec)

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The present study makes an attempt to investigate the impact of India’s macroeconomic variables on the India’s flagship Stock Index: the NSE Nifty. The variables include monthly log transformed prices of the key macro variables viz. money supply, industrial production , rupee –dollar foreign exchange rate, Oil Price and Yield on Government Bonds. For financial variables, closing monthly prices of NSE Nifty, Oil Prices and rupee-dollar foreign exchange rate have been taken into consideration and analysis has carried out for a ten year period April 2008 to March 2018. For other macro variables we have taken closing value of their respective indices. The study employs Dynamic OLS technique of Stock and Watson (1993), a co-integration technique which corrects for simultaneity bias. To correct for the short run dynamics, an error corrective mechanism has also been established parsimoniously. Other tests included in the study are the Augmented Dickey Fuller for detection of unit root of variables and Causality tests between Nifty and each of the macro economic variables under study. The Dynamic OLS was carried out at optimal AIC Lag Identification criteria with maximum limit set at ‘3’ lags and ‘3’ leads. The Dynamic OLS was subject to parsimonious adjustment and the results showed that only three variables, CPI, Forex and Oil were having a co-integrating relation with the dependent variable NSE Nifty Prices. The Parsimonious ECM relation to determine the equilibrium link between short and long run and the results showed that lagged error term was significant and also negative with a figure of 0.51 thereby showing 51 % backward movement towards equilibrium in one period. The unit root diagnostic tests confirmed that time series of all the independent variables was stationary only at 1st difference with only NSE Nifty being stationary at level .

EMPIRICAL TESTING OF ARBITRAGE PRICING THEORY IN THE INDIAN STOCK MARKET: FACTOR ANALYSIS APPROACH

Shikha Menani and H.V. Jhamb

Volume 40, Issue 2 (Jul - Dec)

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Investors all over the world have been in search of a model that can help them in estimating the parity between risk and return relationship which paved the way for the models like CAPM, Conditional CAPM, multi factor CAPM model with different firm specific factors, Arbitrage Pricing Theory and various other modified versions of the same. The traditional theories however have been time and again criticised for being too simple and ignoring an important aspect which is very much evident in the emerging stock markets that is the Behavioural factor. The study tested applicability of APT in the Indian context using monthly data for the period January 2000 to December 2018. Factor analysis and Fama-Macbeth regression technique has been used to find out applicability of APT in the Indian context. Results were found to be partially suited towards the applicability of the APT in estimating the risk return parity of the 500 stocks listed on the Bombay Stock Exchange.

ANALYZING ECONOMIC VALUE ADDED (EVA) AND MARKET VALUE ADDED (MVA) PERFORMANCE MEASURES OF THE SELECTED INFORMATION TECHNOLOGY COMPANIES IN INDIA

Geetu Grover, Abhay Jain and Navkiranjit Kaur Dhaliwal

Volume 40, Issue 2 (Jul - Dec)

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The study attempts to analyze the shareholders’ value using Economic Value Added (EVA) and Market Value Added (MVA) performance measures on the selected Information Technology (IT) companies in India. It provides the ranking and classification of the selected IT companies in India based on MVA and EVA measures. A sample of 119 Information Technology companies in India has been selected using the Capitaline Database for the year 2007-08 to 2016-17. The study found that in totality, all the selected Information Technology companies were value creators (EVA+) except a few companies which were neither value creator nor value destroyer (EVA=0). Accordingly, almost 45% (i.e., EVA+ and MVA+) of the companies are value creators as well as wealth creators, while 55% of the IT companies (EVA+ and MVA-) are performing well. Still, the market is not optimistic about these companies. The IT giants like Wipro Ltd., HCL Technologies Ltd., Tech Mahindra Ltd., Tata Consultancy Services Ltd., and 3i Infotech Ltd., BPO have emerged as the best-performing companies in India. The in-depth analysis based on EVA and MVA of the selected companies will provide insights into the Information and Technology sector to help the investors in their decision to invest in this sector.

PRICING AND DISCOUNT PRACTICES OF SCIENTIFIC INSTRUMENTS INDUSTRY IN AMBALA CANTT

Karnika Gupta and Ishu Garg

Volume 40, Issue 2 (Jul - Dec)

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The present study is a humble attempt to examine the pricing and discount related practices of manufactures from the scientific instruments industry in Ambala Cantt in the state of Haryana. It divides the manufacturing units into micro, small and medium (MSME) enterprises, and compares the level of their practices. For accomplishing the purpose, a sample of 150 units is selected. Collected data are analyzed by using descriptive statistics (mean, standard deviation), and inferential statistics of ANOVA and Post Hoc Test. Results indicate that ‘skimming’ and ‘cost-plus’ pricing methods are highly employed in the industry; whereas, ‘penetration pricing’ is least preferred. Likewise, ‘quantity discount’ and ‘cash discount’ are in high preference, and ‘seasonal discount’ practice is rarely used. These are the medium units who apply all the pricing and discount practices firmly. Small units are also on their track. But, micro units lack behind in the level of usage of different practices. Hence, it is implied by the findings that micro units simply follow their counterparts. Correspondingly, this paper calls for further research to understand the complications involved in the decisions, and finding the solutions of enterprises’ problems.

COUNTRY RISK ANALYSIS IN G7 & BRICS NATIONS: A MULTI-DIMENSIONAL APPROACH

Anshuli Singh

Volume 40, Issue 2 (Jul - Dec)

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In times of uncertainty, the risks related with participating in international operations have increased considerably. Additionally, such risks have moved towards becoming progressively hard to analyse and foresee for decision makers in the universal financial network. Country risk fundamentally showcases the risk state of an economy. In global business, the risks emerging from the national variations in monetary structures, arrangements, natural ecologies and social societies may change the outlook for success of a given venture or business. Analysing the country risk of foreign nations becomes crucial to investors for strategically planning their investments. Taking this complexity of country risk analysis, the current paper proposes an index for country risk, consisting of 12 nations under the Group of seven (G7) and BRICS nations. The CRI is compiled on the basis of seven risk dimensions namely: political, economic, social, technical, environmental, legal & financial and within these seven dimensions, 10 indicators are analysed to calculate the CRI for these 12 nations for even years from 2012 to 2018. All data used in this study is secondary and all sources have been acknowledged. Analysis is done in Microsoft Excel 2016. Ultimately, rankings are allotted to these economies, for both groups together and separately, to present a comprehensive analysis of country risk in these nations.

EXPLORING FIRMS' SIZE AND AGE EFFECT THROUGH TRIANGULATION: AN EMPIRICAL EVIDENCE OF INDIAN FIRMS ANNOUNCING DIVIDENDS AND SHARES REPURCHASES

Sadaf Anwar, Shveta Singh and P. K. Jain

Volume 40, Issue 2 (Jul - Dec)

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Cash dividend and shares repurchase announcements are said to have informational content concerning the value of the firm. The paper attempts to present the results of the study on the impact of cash dividends and shares repurchases decisions on returns, liquidity and risk profile of the firms. It examines whether the age and size of the firm affect the cash dividend and shares repurchase decisions of the firms. In operational terms, it aims to assess the management perception of cash dividend and shares repurchase announcements and the underlying motives for issuing them in Indian context. For the purpose, the study has employed the event study methodology and the pre-test and post-test research design to evaluate the changes. The uniqueness of this study emanates from the fact that it is perhaps the first attempt (to the best of the authors’ knowledge) of its kind based on both the primary and the secondary data evidences at providing the views, motivations and impact behind the cash dividend and shares repurchase decisions and their announcements. It is perhaps the first attempt of its kind comprising of a large sample of BSE 500 index companies. With a substantially larger data set, the present study is expected to provide credible results.

CAUSAL ANALYSIS OF THE RELATIONSHIP BETWEEN EXCHANGE RATE AND GOVERNMENT DEFICIT: EVIDENCE FROM INDIA

Swami Prasad Saxena and Veerangna Singh

Volume 40, Issue 2 (Jul - Dec)

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Causal relationship between the exchange rate and government deficit has a long time debate in economic circle. A number of theories emerged in the past explained their relationship, but still it is inconclusive. This paper attempts to investigate the dynamic relation between exchange rate and government deficit in India during a period from April 2001 to March 2017. The results of VAR Granger causality found unidirectional causality that moves from exchange rate to government deficit. ARDL co-integration test results exhibit no long run relation between the variables. The results of Impulsive Response Function indicate that government deficit responses positively to the one SD shock in exchange rate; exchange rate, in the similar fashion responses positively to the one SD shock in government deficit. The variance decomposition results indicated that a shock to the exchange rate causes 2.069 percent fluctuation in the government deficit in short run and up to 9.04 percent in long run, while a shock to government deficit does not cause any fluctuation in the exchange rate in short run and in long run a shock to government deficit causes 3.65 percent fluctuation in the exchange rate that is very less.

Book Review of The Anthropology of Utopia: Essays on Social Ecology

Annavajhula J.C. Bose

Volume 40, Issue 2 (Jul - Dec)

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The first and second books are academic and fictional introductions respectively to ‘social ecology’ as the means of achieving ecological, harmonious and peaceful world. The second book is better than the first book in that a fictional treatment affecting feelings could potentially reach a broader audience than that reached by a typical academic book. The first one is better than the second one in that it gives conceptual clarity and factual definitiveness to our understanding. Both complement each other. I am very happy to have come across these writings that go a long way in getting out of the limitations of mainstream economics.

BOOK REVIEW OF LEAPFROGGING TO POLE-VAULTING CREATING THE MAGIC OF RADICAL YET SUSTAINABLE TRANSFORMATION

Vibhor Verma

Volume 40, Issue 1 (Jan - Jun)

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We use energy that is environmentally harmful, finite in supply and dangerously concentrated in the hands of a few. On the demand side our energy requirements are shooting up, especially because of the rising standard of living in the developing world.