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.
Year of publication: |
2010
|
---|---|
Authors: | Choudhry, Taufiq ; Pimentel, Rene Coppe |
Published in: |
The Review of Finance and Banking. - Facultatea de Finante, Asigurari, Banci şi Burse de Valori. - Vol. 02.2010, 2, p. 061-076
|
Publisher: |
Facultatea de Finante, Asigurari, Banci şi Burse de Valori |
Saved in:
freely available
Saved in favorites
Similar items by person
-
Stock Returns Under High Inflation and Interest Rates: Evidence from the Brazilian Market
Pimentel, Rene Coppe, (2014)
-
Time-series Properties of Earnings and Their Relationship with Stock Prices in Brazil
Pimentel, Rene Coppe, (2010)
-
Day of the week effect in emerging Asian stock markets: evidence from the GARCH model
Choudhry, Taufiq, (2000)
- More ...