Inflation Hedge in India-Stocks or Bullion

Samir K. Barua and Ragunathan V

IIMA Working Papers from Indian Institute of Management Ahmedabad, Research and Publication Department

Abstract: At a time of runaway inflation, when nothing seems to contain the pace of its gallop, it might be pertinent to look around for an investment which may shield the value of the investor’s money against the devaluing onslaught of inflation gone amuck. In the west common stocks have often been examined as possible hedges against inflation, though other possible hedges such as the bullion have not received the necessary attention. In India however, there is paucity of work done in the very area of inflation hedge itself. This paper therefore empirically investigates common stocks and the bullion as possible inflation hedges in the Indian market. The study regards an asset a hedge against inflation if the rate of increase in its nominal value is greater than the rate of increase in inflation. The methodology thus reduces to regressing the logarithm of the nominal value of the asset on the logrithm of inflation index and test B for being less than or equal to one. The results (based on monthly data for fourteen years) reveal gold to be a consistent inflation hedge, both in the short run and the long run, while silver and common stocks qualify as partial hedges in varying degrees. Also the study clearly reflects the economic stability, apprehensions and the optimism of the Indian market in the pre-emergency, emergency and post-emergency period respectively.

Date: 1982-07-01
References: Add references at CitEc
Citations: View citations in EconPapers (4)

There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:iim:iimawp:wp00505

Access Statistics for this paper

More papers in IIMA Working Papers from Indian Institute of Management Ahmedabad, Research and Publication Department Contact information at EDIRC.
Bibliographic data for series maintained by ().