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Are Stock Prices Hedge Against Inflation? A Revisit over Time and Frequencies in India

Author

Listed:
  • Niyati Bhanja

    (Department of Economics, Pondicherry University, India)

  • Arif Billah Dar

    (Department of Economics, Pondicherry University, India)

  • Aviral Kumar Tiwari

    () (ICFAI University Tripura, India)

  • Olaolu Richard Olayeni

    (Department of Economics, Obafemi Awolowo University, Nigeria)

Abstract

In this paper, the stock price-inflation nexus is investigated using the tools of wavelet power spectrum, cross-wavelet power spectrum and cross-wavelet coherency to unravel time and frequency dependent relationships between stock prices and inflation. Our results suggest that for a frequency band between sixteen and thirty two months, there is some evidence of the fisher effect. For rest of the frequencies and time periods however there is no evidence of the fisher effect and it seems stock prices have not played any role as an inflation hedge.

Suggested Citation

  • Niyati Bhanja & Arif Billah Dar & Aviral Kumar Tiwari & Olaolu Richard Olayeni, 2012. "Are Stock Prices Hedge Against Inflation? A Revisit over Time and Frequencies in India," Central European Journal of Economic Modelling and Econometrics, CEJEME, vol. 4(3), pages 199-213, September.
  • Handle: RePEc:psc:journl:v:4:y:2012:i:3:p:199-213
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    File URL: http://www.cejeme.eu/publishedarticles/2013-25-16-634990659405781250-5342.pdf
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    References listed on IDEAS

    as
    1. Luís Francisco Aguiar-Conraria & Maria Joana Soares & Nuno Azevedo, 2007. "Using Wavelets to decompose time-frequency economic relations," NIPE Working Papers 17/2007, NIPE - Universidade do Minho.
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    Cited by:

    1. repec:ipg:wpaper:2014-108 is not listed on IDEAS
    2. Niyati Bhanja & Arif Dar, 2015. "“The beauty of gold is, it loves bad news”: evidence from three major gold consumers," Economic Change and Restructuring, Springer, vol. 48(3), pages 187-208, November.
    3. Tiwari, Aviral Kumar & Dar, Arif Billah & Bhanja, Niyati & Arouri, Mohamed & Teulon, Frédéric, 2015. "Stock returns and inflation in Pakistan," Economic Modelling, Elsevier, vol. 47(C), pages 23-31.
    4. Aviral Kumar Tiwari & Juncal Cunado & Rangan Gupta & Mark E. Wohar, 2017. "Are Stock Returns an Inflation Hedge for the UK? Evidence from a Wavelet Analysis Using Over Three Centuries of Data," Working Papers 201735, University of Pretoria, Department of Economics.

    More about this item

    Keywords

    Stock prices; inflation; Fisher effect; Indian stock markets; continuous wavelet transform; wavelet coherency;

    JEL classification:

    • C40 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - General
    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • 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

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