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Are Stock Returns an Inflation Hedge for the UK? Evidence from a Wavelet Analysis Using Over Three Centuries of Data

Author

Listed:
  • Aviral Kumar Tiwari

    () (Center for Energy and Sustainable Development (CESD), Montpellier Business School, Montpellier, France)

  • Juncal Cunado

    () (University of Navarra, School of Economics, Edificio Amigos, Spain)

  • Rangan Gupta

    () (University of Pretoria, Department of Economics, Pretoria, South Africa)

  • Mark E. Wohar

    () (College of Business Administration, University of Nebraska at Omaha, Omaha, USA and School of Business and Economics, Loughborough University, Leicestershire, UK)

Abstract

This paper analyzes the relationship between stock returns and the inflation rates for the UK over a long time period (February 1790 to February 2017) and at different frequencies, by employing a wavelet analysis. We also compare the results for the UK economy with those for the US and two developing countries (India and South Africa). Overall, our results tend to suggest that, while the relationship between stock returns and inflation rates varies across frequencies and time periods, there is no evidence of stock returns acting as an inflation hedge, irrespective of whether we look at the two developed or the two developing markets in our sample.

Suggested Citation

  • Aviral Kumar Tiwari & Juncal Cunado & Rangan Gupta & Mark E. Wohar, 2017. "Are Stock Returns an Inflation Hedge for the UK? Evidence from a Wavelet Analysis Using Over Three Centuries of Data," Working Papers 201735, University of Pretoria, Department of Economics.
  • Handle: RePEc:pre:wpaper:201735
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    References listed on IDEAS

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    More about this item

    Keywords

    nominal and real stock returns; inflation; frequency-domain; wavelet analysis;

    JEL classification:

    • C49 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Other
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates

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