Do Stock Returns Hedge against High and Low Inflation? Evidence from Brazilian Companies
This 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.
Volume (Year): 02 (2010)
Issue (Month): 2 (December)
|Contact details of provider:|| Postal: |
Web page: http://www.fin.ase.ro/Email:
More information through EDIRC
References listed on IDEAS
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, 2002.
"Is Disinflation Good for the Stock Market?,"
Journal of Finance,
American Finance Association, vol. 57(4), pages 1617-1648, 08.
- 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.
- 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.
When requesting a correction, please mention this item's handle: RePEc:rfb:journl:v:02:y:2010:i:2:p:061-076. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Tatu Lucian)
If references are entirely missing, you can add them using this form.