Symmetric and Asymmetric influence of Trade Openness on Stock Prices: An Analysis Based on ARDL Bound Test

Abstract

The aim of this research is to find out the short and long run relationship between the two important macroeconomic variables i.e., Exchange rate and Trade openness and BSE SENSEX. The impact of macroeconomic variables plays a vital role in the development of stock market. For analyzingboth type of relationships, the study applied the (ARDL) Autoregressive Distributed Lag model for short run and Bounds Testing Approach for long run relationship. Time series monthlydata from Jan 2009 to Dec 2019 have been taken for the research. For testing Chi Square values for confirming the short run relationship, the study applied the Wald test also. According to the results Exchange rate is affected the stock market in short run and results of Bound Testing Approach, both of the variables affected combinedly in long run. This research is useful to predict the new developments and changes in major stock prices due to import and export activities and also will suggest that what should be done by the policy makers to control the fluctuations in the exchange market which are highly responsible for changes in stock prices.