Research Article Open Access

Stock Return, Growth and Inflation in India: Analysis of Stochastic Seasonality, Impulse Response and Multivariate GARCH

Panchanan Das1
  • 1 University of Calcutta, India
American Journal of Applied Sciences
Volume 18 No. 1, 2021, 107-121

DOI: https://doi.org/10.3844/ajassp.2021.107.121

Submitted On: 18 August 2020 Published On: 3 May 2021

How to Cite: Das, P. (2021). Stock Return, Growth and Inflation in India: Analysis of Stochastic Seasonality, Impulse Response and Multivariate GARCH. American Journal of Applied Sciences, 18(1), 107-121. https://doi.org/10.3844/ajassp.2021.107.121

Abstract

Thisstudy analyses the empirical interdependence among asset returns, industrialgrowth and inflation after controlling for interest rate by consideringstochastic seasonality and conditional volatility with monthly time series inIndia. The HEGY unit root test suggests that industrial growth and inflationexperience only stochastic trend and no persistent stochastic behaviour at anyother seasonal frequencies, while stock return follows persistent seasonaltrend. The study observes that causality goes from stock return to industrialgrowth, although the extent of causality is very low, but not the other wayround. This finding has significant policy implications particularly in thecontext of financial sector reforms in India. Inflation has negative impact onstock returns, while the innovations in stock returns have not transmitted toinflation.

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Keywords

  • Seasonal Time Series
  • Business Cycles
  • Stock Return
  • Economic Growth
  • India JEL Classification Codes: C32
  • E32
  • E44
  • O40
  • 053