Inter linkages and co-integration between foreign institutional investments and nifty index
by Nawal Kishor; Raman Preet Singh
International Journal of Business and Emerging Markets (IJBEM), Vol. 8, No. 2, 2016

Abstract: The objective of the paper is to study the cause and effect relationship between net investments made by foreign institutional investor's (FIIs) and nifty index return in India. This paper further aims to examine the long term association between the two in pre sub prime crisis and post sub prime crisis period. The cause and effect relationship has been investigated applying augmented Dickey Fuller (ADF) unit root test, Granger causality test, Johansen co-integration test and variance decomposition. The study shows that there is a moderate positive correlation between foreign institutional investment inflows and nifty index. There is an evidence of unidirectional causality between foreign institutional investment net inflows and nifty index return. There has been strong evidence of long run association during the total period as well as in pre and post sub prime crisis periods.

Online publication date: Tue, 17-May-2016

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