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Can common stocks provide a hedge against inflation? Evidence from African countries

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  • Alagidede, Paul
  • Panagiotidis, Theodore

Abstract

The extent to which the stock market provides a hedge to investors against inflation is examined for African stock markets. By employing parametric and nonparametric cointegration procedures, we show that the point estimates of the elasticities of stock prices with respect to consumer prices range from 0.015 for Tunisia to 2.264 for South Africa, evidence of a positive long-run relationship. Further, the time path of the response of stock prices to innovations in consumer prices exhibits a transitory negative response for Egypt and South Africa, which becomes positive over longer horizons: important indication that the stock market tends to provide a hedge against rising consumer prices in African markets.

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Bibliographic Info

Article provided by Elsevier in its journal Review of Financial Economics.

Volume (Year): 19 (2010)
Issue (Month): 3 (August)
Pages: 91-100

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Handle: RePEc:eee:revfin:v:19:y:2010:i:3:p:91-100

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Web page: http://www.elsevier.com/locate/inca/620170

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Keywords: Stock prices Inflation Fisher effect African stock markets Cointegration;

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Cited by:
  1. Todd Moss and Ross Thuotte, 2013. "Nowhere Left to Hide? Stock Market Correlation, Regional Diversification, and the Case for Investing in Africa," Working Papers 316, Center for Global Development.
  2. Yu Hsing, 2011. "The Stock Market and Macroeconomic Variables in a BRICS Country and Policy Implications," International Journal of Economics and Financial Issues, Econjournals, vol. 1(1), pages 12-18.
  3. Dragos Stefan Oprea, 2014. "The Fisher effect: Evidence from the Romanian Stock Market," International Journal of Academic Research in Business and Social Sciences, Human Resource Management Academic Research Society, International Journal of Academic Research in Business and Social Sciences, vol. 4(5), pages 637-644, May.
  4. Andrew Phiri & Peter Lusanga, 2011. "Can asymmetries account for the empirical failure of the Fisher effect in South Africa?," Economics Bulletin, AccessEcon, vol. 31(3), pages 1968-1979.

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