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Can Common Stocks Provide A Hedge Against Inflation? Evidence from African Countries

  • Alagidede, Paul
  • Panagiotidis, Theodore

The extent to which the stock market provides a hedge to investors against inflation is examined for African stock markets. By employing parametric and nonparametric cointegration procedures, we show that the point estimates of the elasticities of stock prices with respect to consumer prices range from 0.015 for Tunisia to 2.264 for South Africa, evidence of a positive long-run relationship. Further, the time path of the response of stock prices to innovations in consumer prices exhibits a transitory negative response for Egypt and South Africa, which becomes positive over longer horizons: important indication that the stock market tends to provide a hedge against rising consumer prices in African markets.

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File URL: http://hdl.handle.net/1893/2282
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Paper provided by University of Stirling, Division of Economics in its series Stirling Economics Discussion Papers with number 2010-07.

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Date of creation: Apr 2010
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Handle: RePEc:stl:stledp:2010-07
Contact details of provider: Postal: Division of Economics, University of Stirling, Stirling, Scotland FK9 4LA
Phone: +44 (0)1786 467473
Fax: +44 (0)1786 467469
Web page: http://www.econ.stir.ac.uk/

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