Gold Price, Stock Price and Exchange rate Nexus: The Case of India

Srinivasan P.
Publication date: 
JEL codes: 
G11 - Portfolio Choice; Investment Decisions, G12 - Asset Pricing; Trading volume; Bond Interest Rates.
The paper investigates the causal nexus between gold price, stock price and exchange rate in India through the Autoregressive Distributed Lag (ARDL) bounds testing approach and Granger Causality test. Using monthly time series data, the empirical analysis is carried out for the period from June 1990 to April 2014. Our analysis reveals that gold price and stock price tend to have long-run relationship with exchange rate in India. Besides, there is no evidence of stable long-run cointegration relationship among stock price and gold price in India. Our empirical findings also indicate that there exists no causality runs from gold price to stock price or vice versa in the short-run. It can be concluded that domestic gold price does not contain any significant information to forecast stock prices in India. The study findings are consistent with Kaliyamoorthy and Parithi (2012) where they found no evidence of causality between the gold price and stock price in India.
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