We are pleased to invite you to this week’s research seminar. It will be held on November 1st from 4pm, at Middlesex University Dubai in the Oasis Theatre, Block 16, Knowledge Park. The Research Seminar Series was launched in 2008, and has featured 210 presentations to date. The seminars provide a forum for researchers to share their work. Presenters include faculty from Middlesex University Dubai and other universities in the United Arab Emirates, as well as researchers from other global institutions. This week’s presentation is:
“Examining Granger Causality in the Behavioral Reactions of Institutional Investors: Evidence from India”
Middlesex University Dubai
Institutional investors have played a significant role in the growth and development of capital markets. Developed countries’ capital markets have a proven record of success in terms of transforming funds from surplus units to deficit units. Both domestic institutional investors (DIIs) and foreign institutional investors (FIIs) have been instrumental in establishing key functional areas of stock markets and enhancing efficiency in the operations of such markets mechanisms. Domestic institutional investors try to facilitate funds availability in the core sectors of the economy; foreign institutional investors, on the other hand, provide funds to generate economic benefits from large scale projects like infrastructure. Both investor classes use stock markets to channel their funds for investment purposes and maximize their wealth. The study examines the behavioral reactions of foreign and domestic institutional investors in the context of Indian capital markets. It poses some critical issues whether these two types of institutional investors have common investing behavior, and whether foreign institutional investors affect domestic institutional investors’ strategies. Vector error correction model (VECM) is used to determine the linear interdependencies in the trading and investing behavior of these institutional investors. Granger causality test is used to check if foreign institutional investment strategy influences domestic institutional strategy or vice-versa. The results indicate that neither FIISELL affects DIISELL nor DIISELL affects FIISELL. This may have crucial policy implications that both institutional investors have independent trading strategies especially when it comes to selling stocks. But both institutional investors’ sale transactions do affect their buy transactions implying that any of the institutions’ selling activities should be supported by their buying activities in opposite direction.
Dr. Rajesh Mohnot is a Senior Lecturer in Accounting and Finance at Middlesex University Dubai. He earned his Ph.D. and his Master’s degree from JNV University, India. Since the beginning of his career, Rajesh has been actively involved in research and training, and has delivered training programmes to bankers and corporate executives in the area of financial planning and analysis. Prior to joining Middlesex University, Rajesh worked in Singapore and Malaysia. He is a member of the American Academy of Financial Management. His research interests include volatility in financial markets, predicting stock market returns, market efficiency, FDI and growth, and value creation in banks.