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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ISBN: 978-81-314-2793-4
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