International Journal of Financial Management

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Volatility of Indian Stock Market and Fiis: a Time Series Arima Modeling Approach


Affiliations
1 Assistant Professor, Finance and Accounting, KIIT School of Management, Campus – 7, KIIT University, Bhubaneswar – 751024, Orissa, India
2 Economics Area, KIIT School of Management, Campus – 7, KIIT University, Bhubaneswar – 751024, Orissa
3 Final Year Student, KIIT School of Management, Campus – 7, KIIT University, Bhubaneswar – 751024, Orissa
     

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This paper examines the stock market volatility and FIIs for the period (2004 - 2010). The volatility of NIFTY index influenced by the investment inflows of FIIs is modeled using a time series ARIMA approach. The empirical results calibrated through these models are analytic in several fronts. The paper further models and forecasts the index using the data set, where Foreign Institutional Investment (FII), Nominal Effective Exchange Rate (NEER) and Call money rate are considered as the exogenous variables. Finally, the empirical findings show that if the net FII flow is auto regressed with FII flow of various lag periods then it does not have significant influence on the monthly-volatility of the index. The paper also proposes the possible reasons supporting the empirical observations.

Keywords

Foreign Institutional Investor, Stock Market Volatility, Arima, Nominal Effective Exchange Rate, Call Money Rate
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  • Volatility of Indian Stock Market and Fiis: a Time Series Arima Modeling Approach

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Authors

Anandadeep Mandal
Assistant Professor, Finance and Accounting, KIIT School of Management, Campus – 7, KIIT University, Bhubaneswar – 751024, Orissa, India
Sailabala Debi
Economics Area, KIIT School of Management, Campus – 7, KIIT University, Bhubaneswar – 751024, Orissa
Smruti R. Tripathy
Final Year Student, KIIT School of Management, Campus – 7, KIIT University, Bhubaneswar – 751024, Orissa

Abstract


This paper examines the stock market volatility and FIIs for the period (2004 - 2010). The volatility of NIFTY index influenced by the investment inflows of FIIs is modeled using a time series ARIMA approach. The empirical results calibrated through these models are analytic in several fronts. The paper further models and forecasts the index using the data set, where Foreign Institutional Investment (FII), Nominal Effective Exchange Rate (NEER) and Call money rate are considered as the exogenous variables. Finally, the empirical findings show that if the net FII flow is auto regressed with FII flow of various lag periods then it does not have significant influence on the monthly-volatility of the index. The paper also proposes the possible reasons supporting the empirical observations.

Keywords


Foreign Institutional Investor, Stock Market Volatility, Arima, Nominal Effective Exchange Rate, Call Money Rate

References