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Stock returns and inflation: evidence from an emerging market

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  • Spyros Spyrou

Abstract

Theory suggests that equities are a good hedge against inflation. However, most of the empirical evidence suggests that the relationship between stock returns and inflation is negative. One explanation is the negative correlation between inflation and real output growth. In this paper the relationship between inflation and stock returns is examined for the emerging economy of Greece, during the 1990s. To anticipate the results, the relationship seems to be negative and significant, but only for the period until 1995. Since then, the relationship is not statistically significant, and it is argued that this may be due to the increased role of monetary fluctuations.

Suggested Citation

  • Spyros Spyrou, 2001. "Stock returns and inflation: evidence from an emerging market," Applied Economics Letters, Taylor & Francis Journals, vol. 8(7), pages 447-450.
    • Handle: RePEc:taf:apeclt:v:8:y:2001:i:7:p:447-450
    DOI: 10.1080/13504850010003280
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    Cited by:

    1. Muhammad Shahbaz & Faridul Islam & Ijaz Ur Rehman, 2016. "Stocks as Hedge against Inflation in Pakistan: Evidence from ARDL Approach," Global Business Review, International Management Institute, vol. 17(6), pages 1280-1295, December.
    2. Saqib Muneer & Babar Zaheer Butt & Kashif Ur Rehman, 2011. "A Multifactor Model of Banking Industry Stock Returns: An Emerging Market Perspective," Information Management and Business Review, AMH International, vol. 2(6), pages 267-275.
    3. Habibullah, M.S. & Baharom, A.H. & Fong, Kin Hing, 2009. "Predictive Content of Output and Inflation For Stock Returns and Volatility: Evidence from Selected Asian Countries," MPRA Paper 14114, University Library of Munich, Germany.
    4. George Hondroyiannis & Evangelia Papapetrou, 2006. "Stock returns and inflation in Greece: A Markov switching approach," Review of Financial Economics, John Wiley & Sons, vol. 15(1), pages 76-94.
    5. Somayeh Madadpour & Mohsen Asgari, 2019. "The puzzling relationship between stocks return and inflation: a review article," International Review of Economics, Springer;Happiness Economics and Interpersonal Relations (HEIRS), vol. 66(2), pages 115-145, June.
    6. Alam, Md. Mahmudul & Uddi, Gazi Salah, 2019. "Relationship between Interest Rate and Stock Price: Empirical Evidence from Developed and Developing Countries," SocArXiv 5fket, Center for Open Science.
    7. 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.
    8. Floros, C., 2004. "Stock Returns and Inflation in Greece," Applied Econometrics and International Development, Euro-American Association of Economic Development, vol. 4(2).
    9. Onneetse L Sikalao-Lekobane, 2014. "Do Macroeconomic Variables Influence Domestic Stock Market Price Behaviour in Emerging Markets? A Johansen Cointegration Approach to the Botswana Stock Market," Journal of Economics and Behavioral Studies, AMH International, vol. 6(5), pages 363-372.

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