Do Stock Returns Hedge against High and Low Inflation? Evidence from Brazilian Companies
AbstractThis paper investigates the relationship between stock returns and inflation using monthly data from ten Brazilian firms and the general Brazilian stock market. The period under investigation, 1986-2008, includes periods of unstable high inflation (1986-1994) and stable low inflation (1994-2008). Standard linear regressions are applied to estimate the relationship after testing first for the stochastic structure of the variables. Results indicate that stock returns do act as a hedge against high inflation but fail to act against low inflation. Variance decomposition tests indicate innovations to the inflation rate affect the movement of the stock returns during the total period and the high inflation period.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoArticle provided by Academia de Studii Economice din Bucuresti, Romania / Facultatea de Finante, Asigurari, Banci si Burse de Valori / Catedra de Finante in its journal The Review of Finance and Banking.
Volume (Year): 02 (2010)
Issue (Month): 2 (December)
Contact details of provider:
Postal: Strada Mihai Eminescu nr.13-15, sector 1, Bucuresti, Romania
Web page: http://www.fin.ase.ro/
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Peter Blair Henry, 2001.
"Is Disinflation Good for the Stock Market?,"
NBER Working Papers
8289, National Bureau of Economic Research, Inc.
- Brooks,Chris, 2008. "Introductory Econometrics for Finance," Cambridge Books, Cambridge University Press, number 9780521694681.
- Jaffe, Jeffrey F & Mandelker, Gershon, 1976. "The "Fisher Effect" for Risky Assets: An Empirical Investigation," Journal of Finance, American Finance Association, vol. 31(2), pages 447-58, May.
- Boucher, Christophe, 2006. "Stock prices-inflation puzzle and the predictability of stock market returns," Economics Letters, Elsevier, vol. 90(2), pages 205-212, February.
- Kaul, Gautam, 1987. "Stock returns and inflation : The role of the monetary sector," Journal of Financial Economics, Elsevier, vol. 18(2), pages 253-276, June.
- Granger, C. W. J. & Newbold, P., 1974. "Spurious regressions in econometrics," Journal of Econometrics, Elsevier, vol. 2(2), pages 111-120, July.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Tatu Lucian).
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.