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The long-run relationship between stock prices and goods prices: New evidence from panel cointegration

  • Gregoriou, Andros
  • Kontonikas, Alexandros

We examine the long-run relationship between stock prices and goods prices to gauge whether stock market investment can hedge against inflation. Data from 16 OECD countries over the period 1970-2006 are used. We account for different inflation regimes with the use of sub-sample regressions, while maintaining the power of tests in small sample sizes by combining time-series data across our sample countries in a panel unit root and panel cointegration econometric framework. The evidence supports a positive long-run relationship between goods prices and stock prices with the estimated goods price coefficient being in line with the generalized Fisher hypothesis.

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Article provided by Elsevier in its journal Journal of International Financial Markets, Institutions and Money.

Volume (Year): 20 (2010)
Issue (Month): 2 (April)
Pages: 166-176

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Handle: RePEc:eee:intfin:v:20:y:2010:i:2:p:166-176
Contact details of provider: Web page: http://www.elsevier.com/locate/intfin

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