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Inflation and rates of return on stock: evidence from high inflation countries

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
1042-4431
75-96
Choudhry, Taufiq
6fc3ceb8-8103-4017-b3b5-2d38efa57728
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), 75-96. (doi:10.1016/S1042-4431(00)00037-8).

Record type: Article

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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More information

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
ORCID for Taufiq Choudhry: ORCID iD orcid.org/0000-0002-0463-0662

Catalogue record

Date deposited: 22 May 2006
Last modified: 16 Mar 2024 03:16

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