Do Stock Prices Respond To GDP Growth In INDIA?

European Journal of Innovative Business Management, Volume 1: 1-8, 2013

DO STOCK PRICES RESPOND TO GDP GROWTH IN INDIA?
DR.SARBAPRIYA RAY *
Shyampur Siddheswari Mahavidyalaya, P.O-Ajodhya,University of Calcutta, India
&
Dept. of Commerce, University of Calcutta, India

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ABSTRACT:
The article tries to examine the effect of GDP growth on the stock prices in India using annual data from 1990-91 to 2010-11. A bivariate regression model is designed to examine the effects of GDP growth on the stock prices and granger causality test is conducted to examine whether there exist any causal linkage between stock prices and GDP growth. Granger causality test confirms that there is unidirectional causality between stock price and gross domestic product running from GDP growth to stock price in India. The regression results of the study indicate that gross domestic product positively influence stock prices in India.

Key words: Granger Causality, Regression Model, Gross domestic product, Stock Prices, India.