Did Demonetization Affect Indian Stock Market?
DOI:
https://doi.org/10.21632/irjbs.15.1.1-15Keywords:
India, 2016 demonetization, fixed effect, random effectAbstract
This study explores the impact of "2016 demonetization" on the stock market inIndia. The policy declared 86% of cash in circulation in the form of Indian rupees(INR) 500 & 1000 notes as an illegal tender effective from midnight of November8, 2016. However, India’s government progressively released new 500 and 2000INR notes over the next few months. Following the demonetization announcement, stock prices of cash-sensitive industries like consumer goods and financial services dropped rapidly, reflecting a significant reduction in demand. This study focuses on the short-term effects of demonetization on the stock prices of 100 publicly listed firms using their daily stock data. We use estimating windows within 60 days of the announcement and then capture the short-term effects of demonetization by employing the Ordinary Least Square (OLS), the Fixed Effect (FE), and the Random Effect (RE) methods. Estimation results demonstrate that demonetization effectively decreases stock prices.
References
Aggarwal, N. and Narayanan, S. (2017) ëImpact of indiaís demonetization on domesticagricultural marketsí, (March 1, 2021).
Available at SSRN: https://ssrn.com/ abstract=3066042 or http://dx.doi.org/10.2139/ssrn.3066042
Agrawal, P. and Sangeetha, R. (2019). ëImpact of demonetisation on indian stock marketí, RESEARCH REVIEW International
Journal of Multidisciplinary.
Agrawal, S. (2018). ëBlack Economy and Demonetisationí, New York University.
Banerjee, A. and Kala, N. (2017). ëThe economic and political consequences of in-diaís demonetisationí, VoxDev. URL:http://
voxdev.org/topic/institutions-political-economy/ economic-and-politicalconsequences-india-s-demonetisation
Banerjee, A. V., Breza, E., Chandrasekhar, A. G. and Golub, B. (2018). ëWhen less ismore: Experimental evidence on information
delivery during indiaís demonetizationí, NBER Working Paper No. 24679.
Chodorow-Reich, G., Gopinath, G., Mishra, P. and Narayanan, A. (2019). ëCash and the economy: Evidence from indiaís
demonetizationí, The Quarterly Journal of Economics, Vol. 135, No. 1, pp.57ñ103.
Divya, V. and Sophia, S. (2017). ëImpact of demonetization on stock market returní, Amity Journal of Finance, India. ISSN:
2456-1568 (Online).
Iyengar, M.H., Iyengar, N. and Sampat, H. (2017). ëImpact of us election results on indianstock market: An event study
approachí, International Journal of Applied Research, Vol. 3, No. 5, pp.9ñ13.
Krishnan, D. and Siegel, S. (2017) ëEffects of Demonetization: Evidence from 28 Slum Neighborhoods in Mumbaií, (January 7,
2017). Available at SSRN: https://ssrn. com/abstract=2896026 or http://dx.doi.org/10.2139/ssrn.2896026
Kumar, V. and Bhatia, B. (2018) ëThe effect of demonetization in indian stock market withspecial reference to sectorial
indices: An event studyí, (September 7, 2018). Available at SSRN: https://ssrn.com/abstract=3245889 or http://dx.doi.
org/10.2139/ssrn.3245889
Mukhopadhyay, B. (2019). ëConsumer confidence and lasting effect of demonetisationí, Review of Market Integration, Vol. 11,
No. 1ñ2, pp.54ñ92.
RBI. (2017). ëReserve Bank of India Annual Reportí, Office of the Governor of RBI.
Sharma, D. (2019). ëImpact of demonetization on the share prices of companies listed innational stock exchangeí, Paradigm,
pp.46.
Upadhyay, D. and Suvarna, S. W. (2018). ëImpact of demonetization on the indian stockmarket: With special reference to
bombay stock exchangeí, Paradigm, Vol. 22, No. 2, pp.175ñ184.
Wooldridge, J.M., (2016). ëIntroductory econometrics: A modern approachí, Nelson Education
Downloads
Submitted
Published
How to Cite
Issue
Section
License
Copyright (c) 2024 Sohail Raza, Shahzad Munir (Author)
This work is licensed under a Creative Commons Attribution-ShareAlike 4.0 International License.
Journal Author(s) Rights
For IRJBS to publish and disseminate research articles, we need publishing rights (transferred from the author(s) to the publisher). This is determined by a publishing agreement between the Author(s) and IRJBS. This agreement deals with the transfer or license of the copyright of publishing to IRJBS, while Authors still retain significant rights to use and share their own published articles. IRJBS supports the need for authors to share, disseminate and maximize the impact of their research and these rights, in any databases.
As a journal Author, you have rights to many uses of your article, including use by your employing institute or company. These Author rights can be exercised without the need to obtain specific permission. Authors publishing in IRJBS journals have comprehensive rights to use their works for teaching and scholarly purposes without needing to seek permission, including:
- use for classroom teaching by Author or Author's institution and presentation at a meeting or conference and distributing copies to attendees;
- use for internal training by the author's company;
- distribution to colleagues for their research use;
- use in a subsequent compilation of the author's works;
- inclusion in a thesis or dissertation;
- reuse of portions or extracts from the article in other works (with full acknowledgment of the final article);
- preparation of derivative works (other than commercial purposes) (with full acknowledgment of the final article);
- voluntary posting on open websites operated by the author or the author’s institution for scholarly purposes,
(But it should follow the open access license of Creative Common CC-by-SA License).
Authors/Readers/Third Parties can copy and redistribute the material in any medium or format, as well as remix, transform, and build upon the material for any purpose, even commercially. Still, they must give appropriate credit (the name of the creator and attribution parties (authors' detail information), a copyright notice, an open access license notice, a disclaimer notice, and a link to the material), provide a link to the license, and indicate if changes were made (Publisher indicates the modification of the material (if any) and retain an indication of previous modifications.
Authors/Readers/Third Parties can read, print and download, redistribute or republish the article (e.g. display in a repository), translate the article, download for text and data mining purposes, reuse portions or extracts from the article in other works, sell or re-use for commercial purposes, remix, transform, or build upon the material, they must distribute their contributions under the same license as the original Creative Commons Attribution-ShareAlike (CC BY-SA).
This work is licensed under a Creative Commons Attribution-ShareAlike 4.0 International License.
