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Stock Returns and Inflation in India: An Empirical Analysis

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  • Jyoti Kumari

Abstract

This paper investigates the relationship between stock returns and inflation in India during 1991:4 to 2009:3. Weekly, monthly and quarterly indexes of BSE Sensex and NSE Nifty are used. Weekly, monthly and quarterly Wholesale Price Index (WPI) and monthly Consumer Price Index (CPI) are used as measures of inflation. The analysis is also carried for the subperiod 2002:4-2009:3, and the pre-crisis and post-crisis analysis is conducted through the analysis of the subperiod 2005:1-2009:4. Unit root tests, Granger causality test and regressions are performed for examining the nexus between the variables. Vector Autoregression (VAR) methodology has been employed to investigate the causal link between stock returns and inflation. Impulse Response Functions (IRF) check the response to disturbance in the system. The results suggest that there is no significant relation between stock returns and inflation in post-reform period in India.

Suggested Citation

  • Jyoti Kumari, 2011. "Stock Returns and Inflation in India: An Empirical Analysis," The IUP Journal of Monetary Economics, IUP Publications, vol. 0(2), pages 39-75, May.
    • Handle: RePEc:icf:icfjmo:v:09:y:2011:i:2:p:39-75
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    Cited by:

    1. NEIFAR, MALIKA & HarzAllah, AMIRA, 2020. "Can Canadian Stock market provide complete hedge against Inflation ?," MPRA Paper 99093, University Library of Munich, Germany.
    2. Vanita Tripathi & Ritika Seth, 2014. "Stock Market Performance and Macroeconomic Factors: The Study of Indian Equity Market," Global Business Review, International Management Institute, vol. 15(2), pages 291-316, June.
    3. Sashikanta Khuntia & Gourishankar S. Hiremath, 2019. "Monetary Policy Announcements and Stock Returns: Some Further Evidence from India," Journal of Quantitative Economics, Springer;The Indian Econometric Society (TIES), vol. 17(4), pages 801-827, December.
    4. Onneetse L Sikalao-Lekobane, 2014. "Do Macroeconomic Variables Influence Domestic Stock Market Price Behaviour in Emerging Markets? A Johansen Cointegration Approach to the Botswana Stock Market," Journal of Economics and Behavioral Studies, AMH International, vol. 6(5), pages 363-372.

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