The Effect of Exchange Rates on Economic Growth:
Empirical Testing on Nominal Versus Real
--Mori Kogid, Rozilee Asid, Jaratin Lily, Dullah Mulok
and Nanthakumar Loganathan
This study attempts to investigate the effects of the exchange rates on economic growth in Malaysia using time series data spanning from 1971 to 2009. Both exchange rates, nominal and real, are considered to have similar effects on economic growth. The results of ARDL bounds test suggest that long-run cointegration exists between both nominal and real exchange rates and economic growth with a significant positive coefficient recorded for real exchange rate. In addition, the results of ECM-based ARDL also reveal that both exchange rates have a similar causal effect towards economic growth. Considering the importance of exchange rate variables, especially the real term, these findings eventually suggest that a systematic exchange rate via monetary policy should be properly developed to promote the stability and sustainability of economic growth in Malaysia.
© 2011 IUP. All Rights Reserved.
Integration of Indian Stock Market with Other Markets
in the Asia-Pacific Region
-- P Srikanth
This paper aims to explore the link between the Indian stock market and other selected stock markets in the Asia-Pacific region. Using the monthly data from January 2000 to December 2010, the stock market indices of India (SENSEX), Hong Kong (HSI), Indonesia (JKSE), Malaysia (KLSE), South Korea (KOSPI), Japan (Nikkei 225) and China (SSEC) are examined. Augmented Dickey-Fuller unit root test is performed to check for stationarity, and it is found that all the natural logarithmic values of series are stationary at their level form. Johansen and Juselius cointegration analysis suggests that Indian stock market is integrated with other stock markets in the Asia-Pacific region and there exists a long-term relationship between these markets. By implementing the Vector Error Correction Model (VECM), the short-term dynamics of the Indian stock market to the long-run equilibrium is studied and the results reveal that the short-term distortion to long-term equilibrium is around 25%. Variance decomposition results reveal that the impact of other Asia-Pacific region stock markets on Indian stock market was mild in the first two months, and from the third to fifth month, there was much increase in the contribution of the other selected markets to the variance in Indian stock market.
© 2011 IUP. All Rights Reserved.
Dynamic Panel Data Model and FDI Determinants in India
-- Rudra Prakash Pradhan
The paper deals with different characteristics of panel data models to examine the determinants of FDI inflows in India. Using the data over 2001-2010, it finds that the main determinants of FDI inflows are the availability of power, domestic investment and profit. It further justifies that higher profitability increases FDI inflows into a state, while larger variability in it can reduce the same.
© 2011 IUP. All Rights Reserved.
Valuation of Fixed Price Offers: An IPO Perspective
--Seshadev Sahoo
This paper investigates the pricing of 72 fixed price IPOs issued in India during 2002-2008. The results indicate that industry composite P/E ratio significantly and positively influences both the offer price and list price. The paper lends support to the view that fixed price IPOs issued during high activity period command higher prices than the IPOs issued during low activity period. IPO characteristics, like book value, return on net worth, and insider retention also have significant and positive contribution in evaluating IPO price. However, the age of the IPO firm is found to be inversely associated with price. Subscription rate is also found to be positively associated with list price.
© 2011 IUP. All Rights Reserved.
Market Timing, Selectivity and Mutual Fund Performance:
An Empirical Investigation of Selective Equity Diversified Schemes in India
--Rakesh Kumar
This study is based on the monthly data of 28 equity diversified Indian fund schemes for the period from January 2007 to June 2011. The selected equity diversified fund schemes show mixed performance. About 60% of the fund schemes were able to beat the benchmark markets. Better performing fund schemes were exposed to higher risk but were less afflicted to market risks. All the schemes under study were relatively exposed to less risk than the market, however with high degree of volatility. A majority of the funds were reasonably diversified and reduced the unique risk. Consequently, unique risks and the returns were negatively associated. The study also exposes that about 58% of fund schemes were capable of beating the market by stock selection skills. So far as market timing is concerned, the fund managers almost failed both to book the profits in the up market and accumulate the stock in the down market.
© 2011 IUP. All Rights Reserved.
