International Journal of Financial Management

Open Access Open Access  Restricted Access Subscription Access
Open Access Open Access Open Access  Restricted Access Restricted Access Subscription Access

The Global Financial Crisis and Investor Behavior in Indian Equity Market


Affiliations
1 Associate Professor, Department of Management Studies, Dehradun Institute of Technology, Dehradun, India
2 Assistant Professor, Department of Management Studies, Mahadevi Institute of Technology, Dehradun, India
     

   Subscribe/Renew Journal


The purpose of this research paper is to investigate the performance and relationship of different Investor group particularly Foreign Institutional Investors, Domestic Institutional Investor and Individual Investor using daily net flow in Indian equity market. We are examining the investor behavior before, during&after the financial crisis (2008). Augmented Dickey Fuller tests have employed and found that all the net inflows are stationary at their level and market return stationary at first difference. The causal relationship between all the investor group have checked through Granger Causality test and VAR in different time phase i.e. precrisis, during the crisis and after the crisis periods. The result reveals that the behavior of all the groups in all the phase of the crisis is not varying except domestic investor group performance. The Engle-Granger Co-integration has also proved that there is no cointegration between all different investor groups.

Keywords

FII (Foreign Institutional Investors), Domestic Investor, Financial Crisis
Subscription Login to verify subscription
User
Notifications
Font Size

  • Adabag, M. C. & Ornelas, J. R. (2005). Behavior and Effects of Foreign Investors on Istanbul Stock Exchange. Proceedings of the 4th Annual Conference of the European Economics and Finance Society.

  • Agarwal, R. N. (1997). Foreign Portfolio Investment in Some Developing Countries: A Study of Determinants and Macroeconomic Impact. Indian Economic Review, 32(2), pp. 217 - 229.

  • Ananthanarayanan, S., Krishnamurti, C. & Sen, N. (2005). Foreign Institutional Investors and Security Returns: Evidence from Indian Stock Exchanges. Paper Presented for the Winter Research Conference in Finance, on 21st December, at Indian School of Business, Hyderabad, India.

  • Andrew, B. & Jensen, B. (2007). Firm Structure, Multinationals and Manufacturing Plant Deaths. Review of Economics and Statistics, 89(2), pp. 193 - 204.

  • Andrew, B. & Sjoholm, F. (2003). Foreign Owners and Plant Survival. NBER Working Paper No. 10039.

  • Andrew, B., Jensen, B., Redding, S. & Schott, P. (2009). The Mar- gins of US Trade. American Economic Review Papers and Proceedings, 99(2), pp. 487 - 493.

  • Alvarez, R. & Holger, G. (2007). Multinationals as Stabilizers? Economic Crisis and Plant Employment Growth. IZA Discussion Paper 2692.

  • Batra, A. (2003). The Dynamics of Foreign Portfolio Inflows and Equity Returns in India. Working Paper No. 109. New Delhi, India: ICRIER.

  • Bekaert, G., Harvey, C. R. & Lumsdaine, R. L. (2002). The Dynamics of Emerging Market Equity Flows. Journal of International Money and Finance, 21(3), pp. 295 - 350.

  • Bohn, H. & Tesar, L. (1996). US Equity Investment in Foreign Markets: Portfolio Rebalancing or Return Chasing? American Economic Review, 86(2), pp. 77 - 81.

  • Brennan, M. J. & Cao, H. H. (1997). International Portfolio Investment Flows. Journal of Finance, 52, pp. 1851 - 1880.

  • Chakrabarti, R. (2002). FII Flows to India: Nature and Causes. Money and Finance, 2(7), pp. 61 - 81.

  • Choe, H., Kho, B. & Stulz, R. (1999). Do Foreign Investors Destabilize Stock Markets? The Korean Experience in 1997. Journal of Financial Economics, 54(2), pp. 227 - 264.

  • Clark, J. & Berko, E. (1997). Foreign Investment Fluctuations and Emerging Market Stock Returns: The Case of Mexico. Working Paper No. 24, New York: Federal Reserve Bank of New York.

  • Dahlquist, M. & Robertsson, G. (2004). A Note on Foreigners’ Trading and Price Effects Across Firms. Journal of Banking and Finance, 28, pp. 615 - 632.

  • Errunza, V. & Losq, E. (1989). Capital Flow Controls, International Asset Pricing, and Investors’ Welfare: A Multi-Country Framework. Journal of Finance, 44, pp. 1025 - 1037.

  • French, K. R. & Poterba, J. M. (1991). Investor Diversification and International Equity Markets. American Economic Review, 81(2), pp. 222 - 226.

  • Gordan, J. & Gupta, P. (2003). Portfolio Flows into India: Do Domestic Fundamentals Matter? IMF Working Paper No. 03/20. New Delhi.

  • Griffin, J. M., Nardari, F. & Rene, M. S. (2002). Daily Cross Border Equity Flows: Pushed or Pulled? NBER Working Paper 9000.

  • Jonathan, E., Kortum, S., Neiman, B. & Romalis, J. (2009). Trade and the Global Recession. Mimeo.

  • Kaminsky, G. L. & Schmukler, S. L. (1999). What Triggers Market Jitters? A Chronicle of the Asian Crisis. Journal of International Money and Finance, 18, pp. 537 - 560.

  • Karolyi, G. A. (2002). Did the Asian Financial Crisis Scare Foreign Investors Out of Japan? Pacific Basin Finance Journal, 10, pp. 411 - 442.

  • Kim, W. & Wei, S. (2002). Foreign Portfolio Investors Before and During A Crisis. Journal of International Economics, 56, pp. 77 - 96.

  • Kumar, S. (2009). Investigating Causal Relationship Between Stock Return with Respect to Exchange Rate and FII: Evidence from India, MPRA Working Paper No. 15793. Munich Personal RePEc Archive.

  • Lin, A. Y. & Swanson, P. E.(2004). International Equity Flows and Developing Markets: The Asian Financial Market Crisis Revisited. Journal of International Financial Markets, Institutions & Money, 14, pp. 55 - 73.

  • Merton, R. C. (1987). A Simple Model of Capital Market Equilibrium with Incomplete Information. Journal of Finance, 42(3), pp. 483 - 510.

  • Rose, A. & Spiegel, M. (2009). The Causes and Consequences of the 2008 Crisis: International Linkages and American Exposure. Paci.c Economic Review, Forthcoming.

  • Rogoff, K. (2006). Will Emerging Markets Escape the Next Big Systemic Financial Crisis? Cato Journal, Spring-Summer, 26, pp. 337 - 341.

  • Suresh, B. M. & Prabheesh, K. P. (2008). Causal Relationships Between Foreign Institutional Investments and Stock Returns in India. International Journal of Trade and Global Markets, 1(3), pp. 259 - 265.

  • Subbarao, D. (2009). Impact of the Financial Crisis on India Collateral Damage and Response. Reserve Bank of India Bulletin, March.

  • Tesar, L. & Werner, I. (1994). International Equity Transactions and US Portfolio Choice. In J .Frankel (Ed.), The Internationalization of Equity Markets (pp. 185-220) University of Chicago Press.

  • Tesar, L. & Werner, I. (1995). Home Bias and High Turnover. Journal of International Money and Finance, 14, pp. 467 - 492.

  • Tesar, L. & Werner, I. (1995). US Equity Investment in Emerging Stock Markets. World Bank Economic Review, 9, pp. 109 - 130.

  • Trivedi, P. & Nair, A. (2003). Determinants of FII Investment Inflow to India. Paper Presented in 5th Annual Conference on Money & Finance in the Indian Economy. Mumbai: Indira Gandhi Institute of Development Research (IGIDR).

  • Tong, H. & Shang, J. W. (2009). The Composition Matters: Capital In. Ows and Liquidity Crunch during a Global Economic Crisis. NBER Working Paper No. 15207.

  • Yasushi, H. & Mei, J. (2001). Living with the “Enemy”: An Analysis of Foreign Investment in the Japanese Equity Market. Journal of International Money and Finance, 20, pp. 715 - 735.


Abstract Views: 315

PDF Views: 1




  • The Global Financial Crisis and Investor Behavior in Indian Equity Market

Abstract Views: 315  |  PDF Views: 1

Authors

Prakash Tiwari
Associate Professor, Department of Management Studies, Dehradun Institute of Technology, Dehradun, India
Monika Mehrotra
Assistant Professor, Department of Management Studies, Mahadevi Institute of Technology, Dehradun, India

Abstract


The purpose of this research paper is to investigate the performance and relationship of different Investor group particularly Foreign Institutional Investors, Domestic Institutional Investor and Individual Investor using daily net flow in Indian equity market. We are examining the investor behavior before, during&after the financial crisis (2008). Augmented Dickey Fuller tests have employed and found that all the net inflows are stationary at their level and market return stationary at first difference. The causal relationship between all the investor group have checked through Granger Causality test and VAR in different time phase i.e. precrisis, during the crisis and after the crisis periods. The result reveals that the behavior of all the groups in all the phase of the crisis is not varying except domestic investor group performance. The Engle-Granger Co-integration has also proved that there is no cointegration between all different investor groups.

Keywords


FII (Foreign Institutional Investors), Domestic Investor, Financial Crisis

References