On the Dynamics of Inflation-Stock Returns in India

Bhandari, A. & Bandi, K. J. Quant. Econ. (2017). doi:10.1007/s40953-017-0075-6

19 Pages Posted: 9 Feb 2017

See all articles by Avishek Bhandari

Avishek Bhandari

University of Hyderabad; Institute of Management Technology (IMT), Hyderabad

Bandi Kamaiah

University of Hyderabad - School of Economics

Date Written: November 1, 2015

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 are no longer an adequate hedge against inflation.

Keywords: Stock returns, Inflation, Coherence, Cross wavelets, Spectral density

JEL Classification: C40, G12, E31, G10

Suggested Citation

Bhandari, Avishek and Kamaiah, Bandi, On the Dynamics of Inflation-Stock Returns in India (November 1, 2015). Bhandari, A. & Bandi, K. J. Quant. Econ. (2017). doi:10.1007/s40953-017-0075-6, Available at SSRN: https://ssrn.com/abstract=2914272 or http://dx.doi.org/10.2139/ssrn.2914272

Avishek Bhandari (Contact Author)

University of Hyderabad ( email )

Central University (PO)
Andhra Pradesh
Hyderabad, CA Andhra Pradesh 500 046
India

Institute of Management Technology (IMT), Hyderabad ( email )

Survey No. 38
Cherlaguda, Shamshabad
Hyderabad, Andhra Pradesh 501218
India

Bandi Kamaiah

University of Hyderabad - School of Economics ( email )

Gachibowli
Hyderabad, Andhra Pradesh 500046
India

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