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An analysis of inflation and stock returns for the UK

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  • Li, Lifang
  • Narayan, Paresh Kumar
  • Zheng, Xinwei

Abstract

Whether common stocks provide a hedge against inflation has been long debated. This paper focuses on this question by investigating the relationship between inflation and stock returns in the short term and medium term and under different inflationary regimes using the UK data. Empirical evidence suggests that the UK stock market fails to hedge against inflation in the short term. However, in the medium term there is mixed results. Results from different inflationary regimes show that the relationship between inflation and returns varies in different regimes.

Suggested Citation

  • Li, Lifang & Narayan, Paresh Kumar & Zheng, Xinwei, 2010. "An analysis of inflation and stock returns for the UK," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 20(5), pages 519-532, December.
  • Handle: RePEc:eee:intfin:v:20:y:2010:i:5:p:519-532
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    References listed on IDEAS

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    1. repec:kap:atlecj:v:45:y:2017:i:2:d:10.1007_s11293-017-9543-9 is not listed on IDEAS
    2. 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.
    3. Baresa, Suzana & Bogdan , Sinisa & Ivanovic, Zoran, 2013. "Strategy Of Stock Valuation By Fundamental Analysis," UTMS Journal of Economics, University of Tourism and Management, Skopje, Macedonia, vol. 4(1), pages 45-51.

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    Keywords

    Inflation Stock returns;

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