Vector Autoregression Analysis Of Gold, Exchange Rate And Stock Market Linkages

Abstract

Gold is considered a safe haven asset and is often seen as a hedge against inflation and economic uncertainties. As a result, when the price of gold rises, investors tend to shift their investments from equities to gold, which can lead to a fall in the Sensex. On the other hand, when the price of gold falls, investors may move their investments back to equities, leading to a rise in the Sensex. The current study uses monthly data and a regression analysis test to look at how the Indian SENSEX is affected by changes in currency exchange rates and gold prices for the years April 2020 to April 2022. In other words, this study looks into how the SENSEX, exchange rates, and gold price are related to one another as three financial elements between 2020 and 2022. The goal of the article is to give the investor factual information about investing in gold and money. Indian investors have recently shown no fear and no potential loss in the stock markets as a result of the ongoing rise in gold prices. Once more, changes in exchange rates will have an impact on international trade and consequently, the stock market. The results of the Johansen cointegration test show that the chosen variables have a lasting link. The outcome of a regression test can demonstrate that the variables must either have reciprocal causality or not.