The present study empirically investigates the dynamic linkages between American Depository Receipts (ADRs) and their respective underlying stock returns of Indian stock market. Study analyzes daily data from the respective date of issue of that ADR to April 30, 2013 by applying augmented Dickey-Fuller unit root test, Johansen cointegration test, Granger causality test, vector error correction model, impulse response function and variance decomposition. The empirical result shows that both underlying stocks and ADRs are level stationary and longrun equilibrium relationship exists between them. Further, Granger causality test uncovers that ADRs lead underlying stocks. Additionally, impulse response function reveals that both underlying stocks and ADRs positively affect each other. Likewise, variance decomposition provides evidence that underlying stocks explain around half of the variance of ADRs. Major conclusion of this study is that price discovery takes place in ADR market, proposing that arrival of new information disseminates faster in ADR market.

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The study investigates the role of gold as a strategic prophecy against inflation and exchange rate. The main research question of the present study is whether gold has acted as a hedge against inflation and exchange rate for India. Study has evaluated monthly data of gold price, inflation and exchange rate over the period January 1991 to September 2012. By applying Augmented Dickey Fuller unit root test, Johansen Cointegration test and Granger Causality test in Error Correction Model framework, study concludes that Gold Price and Exchange rate are I (1) and Inflation is I (2). It also concludes that there exists long run equilibrium relation among all three variables. However, study provides evidence of no Granger Causality among these variables. By applying ARCH-LM test, heteroskedasticity was detected and Gold price can be modeled as GARCH (1, 1). A negative relationship was found between gold and inflation which suggests that gold acts as an internal hedge against inflation for India. Major implication of this study is that Indian investor should prefer gold investment in the time of inflation boom.