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On the Dynamics of Inflation-Stock Returns in India

Author

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  • Avishek Bhandari

    (University of Hyderabad)

  • Kamaiah Bandi

    (University of Hyderabad)

Abstract

In this paper, an attempt is made to examine the relationship between inflation and stock returns in India using spectral and time-frequency methods. Scale specific relation between inflation and stock returns is unraveled, allowing us to capture the relationship at varying investment horizons. The results based on monthly data from 1994:5 to 2014:11, obtained using spectral and wavelet techniques, reveal that there exist no significant pro-cyclical interdependencies between inflation and stock returns, implying that stock returns is no longer an adequate hedge against inflation.

Suggested Citation

  • Avishek Bhandari & Kamaiah Bandi, 2018. "On the Dynamics of Inflation-Stock Returns in India," Journal of Quantitative Economics, Springer;The Indian Econometric Society (TIES), vol. 16(1), pages 89-99, March.
    • Handle: RePEc:spr:jqecon:v:16:y:2018:i:1:d:10.1007_s40953-017-0075-6
    DOI: 10.1007/s40953-017-0075-6
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    More about this item

    Keywords

    Stock returns; Inflation; Coherence; Cross wavelets; Spectral density;
    All these keywords.

    JEL classification:

    • C40 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - General
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)

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