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On the Dynamics of Inflation-Stock Returns in India

Avishek Bhandari () and Kamaiah Bandi ()
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Avishek Bhandari: University of Hyderabad
Kamaiah Bandi: University of Hyderabad

Journal of Quantitative Economics, 2018, vol. 16, issue 1, 89-99

Abstract: 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.

Keywords: Stock returns; Inflation; Coherence; Cross wavelets; Spectral density (search for similar items in EconPapers)
JEL-codes: C40 G12 E31 G10 (search for similar items in EconPapers)
Date: 2018
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Handle: RePEc:spr:jqecon:v:16:y:2018:i:1:d:10.1007_s40953-017-0075-6