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Stock Returns and Inflation

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  • Mark Crosby

Abstract

In this paper the relationship between inflation and stock returns in Australia is examined. It is found that increases in the price level reduce the real level of the stock price index. However, it is also found that the question of whether persistent increases in inflation affect real returns cannot be addressed using the Australian data.

Suggested Citation

  • Mark Crosby, 2001. "Stock Returns and Inflation," Australian Economic Papers, Wiley Blackwell, vol. 40(2), pages 156-165, June.
    • Handle: RePEc:bla:ausecp:v:40:y:2001:i:2:p:156-165
    DOI: 10.1111/1467-8454.00119
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    Cited by:

    1. Hondroyiannis, George & Papapetrou, Evangelia, 2006. "Stock returns and inflation in Greece: A Markov switching approach," Review of Financial Economics, Elsevier, vol. 15(1), pages 76-94.
    2. Mansur, Alfan & Liu, Yichang & Zaman, Kazi Arif Uz, 2015. "Portfolio Shocks and the Dynamics of the Real Economy of Australia (1980-2014): A Structural Vector Autoregressive Model Approach," MPRA Paper 93992, University Library of Munich, Germany, revised 17 May 2015.
    3. Renée Fry & James Hocking & Vance L. Martin, 2008. "The Role of Portfolio Shocks in a Structural Vector Autoregressive Model of the Australian Economy," The Economic Record, The Economic Society of Australia, vol. 84(264), pages 17-33, March.
    4. Dikaios Tserkezos & Eleni Thanou, 2007. "Conventional Nonlinear Relationships between GDP, Inflation and Stock Market Returns. An Investigation for the Greek Economy," Working Papers 0731, University of Crete, Department of Economics.
    5. Basse, Tobias & Wegener, Christoph, 2022. "Inflation expectations: Australian consumer survey data versus the bond market," Journal of Economic Behavior & Organization, Elsevier, vol. 203(C), pages 416-430.
    6. Barnes, Michelle L., 1999. "Inflation and returns revisited: a TAR approach," Journal of Multinational Financial Management, Elsevier, vol. 9(3-4), pages 233-245, November.
    7. Lan, Yueqin & Huang, Yong & Yan, Chao, 2021. "Investor sentiment and stock price: Empirical evidence from Chinese SEOs," Economic Modelling, Elsevier, vol. 94(C), pages 703-714.
    8. Ali, Amjad & Khokhar, Bilal & Sulehri, Fiaz Ahmad, 2023. "Financial Dimensions of Inflationary Pressure in Developing Countries: An In-depth Analysis of Policy Mix," MPRA Paper 119364, University Library of Munich, Germany.
    9. Charles O. Manasseh & Ambrose N. Omeje, 2016. "Application of Generalized Autoregressive Conditional Heteroschedasticity Model on Inflation and Share Price Movement in Nigeria," International Journal of Economics and Financial Issues, Econjournals, vol. 6(4), pages 1491-1501.
    10. Du, Ding, 2006. "Monetary policy, stock returns and inflation," Journal of Economics and Business, Elsevier, vol. 58(1), pages 36-54.
    11. Rushdi, Mustabshira & Kim, Jae H. & Silvapulle, Param, 2012. "ARDL bounds tests and robust inference for the long run relationship between real stock returns and inflation in Australia," Economic Modelling, Elsevier, vol. 29(3), pages 535-543.
    12. Dalina Amonhaemanon & Jan Annaert & Marc J.K. De Ceuster & Hau Le Long, 2014. "The Fisher Hypothesis and Investment Assets: The Vietnamese and Thai Case," International Journal of Financial Research, International Journal of Financial Research, Sciedu Press, vol. 5(4), pages 180-195, October.
    13. Mathius Tandiontong, 2017. "The Influence of Financial Distress Using Altman Z-Score, The Beta of Stocks and Inflation To The Stock Return," GATR Journals jfbr126, Global Academy of Training and Research (GATR) Enterprise.

    More about this item

    JEL classification:

    • E30 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - General (includes Measurement and Data)
    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)

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