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A Research Report

On

“VOLATILITY OF SHARE PRICES WITH RESPECT

TO ECONOMIC FACTORS”Submitted in partial fulfillment of requirement for the award of the degree of

Master of Business AdministrationOf Bangalore

University By

PANCHAKSHAKSHARI MB

Reg. No: 09HDCMA049

Under the Guidance and

Supervision Of

Prof. APARNA B

DEPARTMENT OF MANAGEMENT STUDIES

ADVANCED MANAGEMENT COLLEGE

19TH

KM, BANNERGATTA ROAD

BANGALORE, 560083



ACKNOWLEDGEMENT

It is with great pleasure and gratitude that I acknowledge the contribution of several

individuals towards the successful completion of the project.

I sincerely thank to Dr . G S Anandan, Princ ipal of Advanced Management College,

Bangalore for granting me permission to take up the project.

I would like to express my gratitude to Prof. Aparna B Project guide, for her valuablesuggestion and encouragement, which are imperative for the completion of this project.

Words cannot express the immense gratitude I have for my parents who have been

instrumental in shaping my career. I am thankful to all my friends and to all the

unseen hands that have made this project possible.

Panchakshari MB



DECLARTION

I here by declare that this report entitled “ A RESEARCH ON

VOLATILITY OF SHARE PRICES WITH RESPECT TO ECONOMIC

FACTORS”, has been prepared by me in partial fulfillment of the award

of the degree, Master of Business Administration at Bangalore

University . This report or a similar report on this topic has not been

submitted for any other examination and does not form a part of any other

course undergone by me.

Place: Bangalore

Date: 00-00-2011 Panchakshari MB

Reg. No: 09HDCMA049



Research on the volatility of Indian Share Market with Respect toEconomic Factors: At a glance

Contents

Introduction, Scope and Methodology of the Review Process

o Introduction 2

o Problem Statement 4

o Theoretical Framework 5

o Review of literature 7

o Research Methodology 11

oConceptual Definitions 13

o Criteria for selection and review of SENSEX constituents 15

Review of Research in Various Fields

o FII Inflows to India: Their Effect on Stock Market Liquidityand V o l a t i l i t y . 17

O Inflation rate and its Effect on sock market Liquidityand volatility. 26

O Foreign Exchange rate and its Effect on stock marketliquidity and volatility. 43

O Calculations of correlation coefficients between theshare prices of each companies and the economic factors

o Testing for Hypothesis 54

Findings 56



A B S T R A CT

This research is done in the field of Indian share markets taking into account only

three years data from Feb. 2007 to Feb 2010. The research includes how the share

prices of various selected companies vary w.r.t. to economic factors. The research

work includes the collection of data regarding the share prices of the selected

companies during the past three years and the SENSEX. Simultaneously, I have

searched through various Indian journals in our library, located books listed in the

library catalogue and traced through the list of references provided in various

research works. The main objective is to study how share prices vary w.r.t economicfactors and to enable the i nves tors in exploring the investment opportunities using the

economic indicators.

Moreover, a large number of works are merely descriptive or prescriptive without

rigorous analysis. Certain areas such as arbitrage pricing theory, option pricing theory,

agency theory, and signaling theory are virtually unrehearsed in the Indian context.

Besides, very little theoretical work has been done by researchers in India. However,

with improved availability of databases and computing resources, and with increasingglobal interest in Indian markets, we expect an explosion of

Work in the near future.

Advanced Management College

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