Examining the Fisher Effect in Short and Long Run: A Study of NSE Sectoral Indices
Published: 2017
Author(s) Name: Khalid Ul Islam, M. M. Goyal |
Author(s) Affiliation: Research Scholar (Ph.D.), Dept. of Commerce, Delhi School of Eco., Univ. of Delhi, Delhi, India.
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Abstract
The belief that stock market provides hedge against
inflation has been put to test by many researchers
over the past few decades. The present study aims
at testing the Fisher effect in the Indian context. We
have used monthly data, from July 2006 to June 2016,
of the National Stock Exchange sectoral indices and
consumer price index. The ordinary least square
regression and Johansen cointegration approach have
been used to test whether or not Indian sectoral indices
provide hedge against inflation in short and long run
respectively. The weak exogenity test under VECM
has been used to establish the hedge hypothesis in the
Indian stock market. The present study has established
results in support to the hedge hypothesis that stock
market provides hedge against inflation.
Keywords: Inflation, Stock Returns, Johansen Cointegration, OLS Regression, Weak Exogenity
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