Inflation and rates of return on stock: evidence from high inflation countries
Inflation and rates of return on stock: evidence from high inflation countries
This article investigates the relationship between stock returns and inflation in four high inflation (Latin and Central American) countries: Argentina, Chile, Mexico and Venezuela. Compared to the bulk of the previous research (involving low inflation) this article provides evidence of a positive relationship between current stock market returns and current inflation. This result confirms that stock returns act as a hedge against inflation. Results also show that past rates of inflation also influence the current rate of stock returns. Similar tests are conducted using real rate of stock returns. Some evidence of an inverse relationship between current real returns and current and one-period lagged inflation is found.
Fisher effect, ARIMA, fractional-integration
75-96
Choudhry, Taufiq
6fc3ceb8-8103-4017-b3b5-2d38efa57728
2001
Choudhry, Taufiq
6fc3ceb8-8103-4017-b3b5-2d38efa57728
Choudhry, Taufiq
(2001)
Inflation and rates of return on stock: evidence from high inflation countries.
Journal of International Financial Markets, Institutions and Money, 11 (1), .
(doi:10.1016/S1042-4431(00)00037-8).
Abstract
This article investigates the relationship between stock returns and inflation in four high inflation (Latin and Central American) countries: Argentina, Chile, Mexico and Venezuela. Compared to the bulk of the previous research (involving low inflation) this article provides evidence of a positive relationship between current stock market returns and current inflation. This result confirms that stock returns act as a hedge against inflation. Results also show that past rates of inflation also influence the current rate of stock returns. Similar tests are conducted using real rate of stock returns. Some evidence of an inverse relationship between current real returns and current and one-period lagged inflation is found.
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Published date: 2001
Keywords:
Fisher effect, ARIMA, fractional-integration
Identifiers
Local EPrints ID: 35696
URI: http://eprints.soton.ac.uk/id/eprint/35696
ISSN: 1042-4431
PURE UUID: 457df13e-6c0b-416b-bb97-847e8c37cf55
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Date deposited: 22 May 2006
Last modified: 16 Mar 2024 03:16
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