Relationship between Monthly Common Stock Prices and Monthly Inflation in India
DOI:
https://doi.org/10.47604/ijecon.2296Keywords:
Inflation, Stock Prices, Demonetisation, Cointegration, Vector Auto-RegressionAbstract
Purpose: The purpose of the study is to scrutinise whether monthly inflation rate and monthly common stock prices are interlinked and if they are linked, then what is the kind of affiliation among the variables.
Methodology: The paper has used the vector autoregression model (VAR) to determine whether there exists a relationship between monthly common stock prices and monthly inflation rates or not.
Findings: The paper's findings can be summarised as no cointegration exists between monthly inflation rates and monthly stock prices, meaning there is no relationship (neither long nor short) between inflation and common stock prices. The other insight that can be concluded from the research is that there also doesn’t exist any cause-and-effect relationship between the inflation rate & monthly common stocks.
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References
Al-Zoubi, M. and Al-Sharkas, A., 2010. Stock prices and inflation: evidence from Jordan, Saudi- Arabia, Kuwait, and Morocco. In Economic Research Forum.
Ajaz, T., Nain, M.Z., Kamaiah, B. and Sharma, N.K., 2017. Stock prices, exchange rate and interest rate: evidence beyond symmetry. Journal of Financial Economic Policy.
Fama, E.F. and Schwert, G.W., 1977. Asset returns and inflation. Journal of financial economics, 5(2), pp.115-146.
Mousa, S.N., Safi, W.A., Hasoneh, A. and Abo-orabi, M.M., 2012. The relationship Between inflation and stock prices (A Case of Jordan). International Journal of Applied Agricultural Research, 10, pp.46-52.
Omran, M. and Pointon, J., 2001. Does the inflation rate affect the performance of the stock market? The In thee of Egypt. Emerging markets review, 2(3), pp.263-279.
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Copyright (c) 2024 Amit Kumar
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