1.
S.p. Aggarwal
– Principal, Ramanujan College, University Of Delhi, Delhi
2.
Sunita Gupta And Anshika Agarwal
– Principal, Ramanujan College, University Of Delhi, Delhi
Abstract
This paper checked whether inflation matter for stock markets or not. In this paper the nature of
relationship and the causality between inflation rates and stock market is checked for the period
ranging from April 2005 to March 2015 for Indian market. Augmented Dickey-Fuller Unit Root
test is applied and it is found BSE 100 series and Wholesale price Index series are non-stationary
at level and at first difference these series are stationary. And then by applying Granger-Causality
test, it is found that there is no causal relationship between inflation rates and stock market in
Indian context. They do not lead or lag each other. Again, by applying Johansen co-integration
test it is seen that inflation rates and stock market do not move together in the long run and
there is co-integration between them. The findings of this paper might help policy makers and
investors to take better decisions.
Keywords Inflation Rate, Stock Market, Granger Causality, Johansen Co-integration.
