6 An Empirical Study of Non-Linear Relationship between World Oil Price & Indian Stock Exchange

The research paper aim to formulate econometric model to investigate the relationship between the world oil price changes & stock exchange returns in India in the presence of regime switching dynamic. Two regimes is the multivariate Markov Switching vector auto regression (MS-VAR) model with regime shifts in both the mean and the variance is used to extract common regime switching behaviors from the price index series it has been interpret that the stock return series evidence of relationship exists among the series. The study interacts with the oil price changes and the economic measure parameter has received considerable attention from policymakers. The estimated MS-VAR model reveal that as the oil price increase it will follow by the rises of stock price index. the MS-VAR model is a good option for estimating the Non-Linear relationship between the World Oil Price & Indian Stock Exchange.