Stock Prices, Inflation, and Output: Evidence from the Emerging Markets

Osamah M. Al-Khazali

Journal of Emerging Market Finance, 2003, vol. 2, issue 3, 287-314

Abstract: This article examines the short and long-term relationships between stock prices, inflation, and output in 21 emerging capital markets. It also investigates whether the proxy hypothesis can explain the puzzling negative relation between stock returns and inflation. The study shows that in the short run the negative relationship between stock returns and inflation still persist for all countries except Malaysia, even after the effects of expected economic activity and inflation variability have been explicitly incorporated. Furthermore, the results of the generalised autoregressive conditional heteroscedastic (GA R CH) model are consistent with the OLS results. These results reject the proxy-effect hypothesis in the short run. However, in the long run, cointegration tests verify a long-run equilibrium between stock prices, consumer price index, and the real economic activity. The findings support the Fisher effect and the proxy hypotheses in the long run only.

Date: 2003
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
https://journals.sagepub.com/doi/10.1177/097265270300200302 (text/html)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:sae:emffin:v:2:y:2003:i:3:p:287-314

DOI: 10.1177/097265270300200302

Access Statistics for this article

More articles in Journal of Emerging Market Finance from Institute for Financial Management and Research
Bibliographic data for series maintained by SAGE Publications ().