An Empirical Analysis of Stock Market Performance and Economic Growth: Evidence from India

Variables:

For monthly analysis - IIP (Index of Industrial Production is used as a proxy for GDP), BSE- SENSEX and NSE-S&P CNX Nifty (Broad based active indices of stock markets of India). For quarterly analysis - RGDP (constant prices with base year 1999-2000), BSE-SENSEX and NSE-S&P CNX Nifty (quarterly average closing prices) are used for the analysis.

Empirical Model:

The present study undertakes a comprehensive set of econometric tests for the empirical analysis such as; Unit root (ADF, PP and KPSS) tests, Granger Causality test, Engle-Granger Cointegration method and finally; Error Correction Model (ECM). These models are described as follows:

1.