Financial Risk Management
Inflation, Stock Market Return and Real Estate Sector: Evidence from Indian Economy
Article Details
| Pub. Date | : Sep, 2019 |
|---|---|
| Product Name | : The IUP Journal of Financial Risk Management |
| Product Type | : Article |
| Product Code | : IJFRM11909 |
| Author Name | : Hiteksha Upadhyay |
| Availability | : YES |
| Subject/Domain | : Finance Management |
| Download Format | : PDF Format |
| No. of Pages | : 07 |
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Abstract
The present paper intends to show that investors must critically evaluate the investment scenario before investing because inflation and stock market return are parts of systematic risk which cannot be controlled by them. Real estate is one of the few assets that reacts proportionately to inflation. The present paper examines the association among inflation, capital market development and real estate sector using time series of monthly data for the period from January 2007 to January 2017. Returns on National Stock Exchange Nifty are taken as a proxy for market returns. Consumer price index is taken as a measure of inflation and realty index return represents the real estate sector. The study tests for stationarity of time series using Augmented Dickey-Fuller unit root test. The Granger causality test results reveal that inflation does not cause realty index return.
Description
Investors’ decision to invest, buy and sell properties depends on the market value of that
property. Investors have to evaluate all available avenues meticulously as there are certain
risks which cannot be controlled. Real estate is one of the few assets that reacts proportionately
to inflation.
As an investor, one would like to invest only in an avenue where he/she gets good return
against inflation. High profile Indian investors prefer to park their savings in real estate
sector. Against this backdrop, the present paper seeks to examine the association among
inflation, capital market development and real estate sector. Whether reality sector can give
returns outperforming the inflation or not would be examined by the study. It is difficult to
collect data from different regions regarding real estate, so as a proxy of real estate sector,
Nifty reality index is considered in this study, which is a perfect reflection of companies
engaged in construction and residence business in India.
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