Are stocks a good hedge against inflation? evidence from emerging markets
Theory suggests that equities are a good hedge against inflation. However, most of the empirical evidence for industrialized economies suggests that the relationship between stock returns and inflation is negative. One explanation is the negative correlation between inflation and real output growth. This paper examines the relationship between inflation and stock returns for ten important Emerging Stock Market (ESM) markets, namely, Chile, Mexico, Brazil, Argentina, Thailand, S. Korea, Malaysia, Hong Kong, Philippines and Turkey, during the 1990s. To anticipate the results, the relationship between stock returns and inflation, for the whole sample period, is positive and statistically significant for three of the sample ESMs, while it is positive (but statistically insignificant) for a further three. Only for one ESM is the relationship negative and statistically significant. This result may be due to the role of money and the positive relationship between consumer prices and output.
If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Volume (Year): 36 (2004)
Issue (Month): 1 ()
|Contact details of provider:|| Web page: http://www.tandfonline.com/RAEC20|
|Order Information:||Web: http://www.tandfonline.com/pricing/journal/RAEC20|
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.:
- Danthine, Jean-Pierre & Donaldson, John B, 1986. "Inflation and Asset Prices in an Exchange Economy," Econometrica, Econometric Society, vol. 54(3), pages 585-605, May.
- Corhay, A. & Tourani Rad, A. & Urbain, J. -P., 1993. "Common stochastic trends in European stock markets," Economics Letters, Elsevier, vol. 42(4), pages 385-390.
- Geske, Robert & Roll, Richard, 1983. " The Fiscal and Monetary Linkage between Stock Returns and Inflation," Journal of Finance, American Finance Association, vol. 38(1), pages 1-33, March.
- Fama, Eugene F. & Schwert, G. William, 1977. "Asset returns and inflation," Journal of Financial Economics, Elsevier, vol. 5(2), pages 115-146, November.
- Ely, David P. & Robinson, Kenneth J., 1997. "Are stocks a hedge against inflation? International evidence using a long-run approach," Journal of International Money and Finance, Elsevier, vol. 16(1), pages 141-167, February.
- Ely, David P. & Robinson, Kenneth J., 1992.
"Stock returns and inflation: Further tests of the role of the central bank,"
Journal of Macroeconomics,
Elsevier, vol. 14(3), pages 525-543.
- David P. Ely & Kenneth J. Robinson, 1991. "Stock returns and inflation: further tests of the role of the central bank," Financial Industry Studies Working Paper 91-1, Federal Reserve Bank of Dallas.
- Arjun Chatrath & Sanjay Ramchander & Frank Song, 1997. "Stock prices, inflation and output: evidence from India," Applied Financial Economics, Taylor & Francis Journals, vol. 7(4), pages 439-445.
When requesting a correction, please mention this item's handle: RePEc:taf:applec:v:36:y:2004:i:1:p:41-48. 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: (Michael McNulty)
If references are entirely missing, you can add them using this form.