scholarly journals Inflation, Output, And Stock Prices: Evidence From Brazil

2011 ◽  
Vol 18 (1) ◽  
Author(s):  
Bahram Adrangi ◽  
Arjun Chatrath ◽  
Antonio Z. Sanvicente
Keyword(s):  
Stock Returns ◽  
Stock Prices ◽  
Economic Activity ◽  
Negative Relationship ◽  
The Real ◽  
Price Levels ◽  
Long Run ◽  
Inflation Rates ◽  
Cointegration Tests ◽  
Long Run Equilibrium

<p class="MsoNormal" style="text-align: justify; margin: 0in 40.5pt 0pt 0.5in;"><span style="mso-bidi-font-style: italic;"><span style="font-size: x-small;"><span style="font-family: Batang;">Research in economics and finance documents a puzzling negative relationship between stock returns and inflation rates in markets of industrialized economies.<span style="mso-spacerun: yes;">&nbsp; </span>The present study investigates this relationship for Brazil. We show that the negative relationship between the real stock returns and unexpected inflation persists after purging inflation of the effects of the real economic activity.<span style="mso-spacerun: yes;">&nbsp; </span>The Johansen and Juselius cointegration tests verify a long-run equilibrium between stock prices, general price levels, and the real economic activity. Furthermore, stock prices and general price levels also show a strong long-run equilibrium with the real economic activity and each other.<span style="mso-spacerun: yes;">&nbsp;&nbsp; </span>The findings lend support to Fama&rsquo;s proxy hypothesis in the long-run.</span></span></span></p>

Growth and returns across countries

2021 ◽  
pp. 78-87
Author(s):  
Jesper Rangvid
Keyword(s):  
Economic Growth ◽  
Interest Rates ◽  
Stock Returns ◽  
Stock Prices ◽  
Economic Activity ◽  
Wide Margin ◽  
The Past ◽  
Long Run ◽  
The Us ◽  
Long Run Risk

This chapter examines the relation between long-run economic growth and returns across countries. Have countries that have experienced high GDP growth historically also experienced high stock returns? The chapter contains three main messages. First, there is no clear tendency that countries that have grown fast in the past are also countries that have delivered high stock returns in the past. Second, as in the US, stock prices have in many countries followed economic activity in the long run. Third, real interest rates relate to economic growth across countries in the long run.Another conclusion emerging from this chapter is that long-run stock returns exceed long-run rates of economic growth and long-run risk-free rates by a wide margin.

scholarly journals Macroeconomic Variables and Stock Returns Revisited

2020 ◽  
Vol 03 (10) ◽  
Author(s):  
Feifei Wang ◽  
Keyword(s):  
Stock Returns ◽  
Stock Prices ◽  
Explanatory Power ◽  
Macroeconomic Factors ◽  
Vector Error Correction ◽  
Macroeconomic Variables ◽  
The Real ◽  
Vector Error ◽  
Long Run ◽  
Short Run

I revisit the relation between macroeconomic activities and stock prices by selecting the most important macroeconomic variables that are appropriate for analyzing their impact on stock returns. Using vector autogressive models (VAR), combined with co integration analysis and the vector error correction model (VECM) I estimate the explanatory power of each macroeconomic variable on the variations of the stock prices and distinguish the short-run from long-run movements among all key macroeconomic variables. I find that (1) in the short-run macroeconomic variables do not appear help explain changes in stock returns, (2) in the long-run the real interest rate and industrial production are the most important macroeconomic factors, and (3) in the long-term the real economic activity and stock returns Granger-cause each other.

scholarly journals An Empirical Examination Of The Effects Of Inflation And Hedging On Investments In The U.S. Air Transport Sector Over The Period Since Deregulation

2011 ◽  
Vol 3 (8) ◽  
Author(s):  
Bahram Adrangi ◽  
George Battistel ◽  
Arjun Chatrath ◽  
Richard Gritta ◽  
Kambiz Raffiee
Keyword(s):  
Stock Returns ◽  
Negative Relationship ◽  
Equity Returns ◽  
Air Transport ◽  
Transport Sector ◽  
Empirical Examination ◽  
Long Run ◽  
Cointegration Tests ◽  
Short Run ◽  
Equity Index

<p class="MsoNormal" style="text-align: justify; margin: 0in 0.6in 0pt 0.5in;"><span style="font-size: x-small;"><span style="font-family: Times New Roman;">Research in economics and finance has documented a negative relationship between stock returns and inflation rates in most economies.<span style="mso-spacerun: yes;">&nbsp; </span>The purpose of this study is to investigate this relationship for a particular specific sector investment, air transportation. A significant negative relationship is shown between the air equity index returns and unexpected inflation.<span style="mso-spacerun: yes;">&nbsp; </span>Air equity returns, however, are found not be correlated with expected inflation.<span style="mso-spacerun: yes;">&nbsp; </span>The Johansen and Juselius cointegration tests verify a long-run equilibrium between air transport equity index, general price levels, and the real economic activity. The short-run dynamics derived from the error-correction model, however,<span style="mso-spacerun: yes;">&nbsp; </span>do not support air transport equity index&rsquo;s long-run inflation hedging ability. These findings indicate that investing in air transport equity index may not be a reliable hedge against inflation in the long- or short-run.<span style="mso-spacerun: yes;">&nbsp; </span>In addition, the findings do not lend support for the Fisherian and Proxy hypotheses.<span style="mso-spacerun: yes;">&nbsp;&nbsp; </span></span></span></p>

scholarly journals The associations between stock prices, inflation rates, interest rates are still persistent

2019 ◽  
Vol 25 (49) ◽  
pp. 149-161
Author(s):  
Tarek Eldomiaty ◽  
Yasmeen Saeed ◽  
Rasha Hammam ◽  
Salma AboulSoud
Keyword(s):  
Interest Rates ◽  
Stock Prices ◽  
Empirical Literature ◽  
Real Interest Rates ◽  
Content Type ◽  
Speed Of Adjustment ◽  
Long Run ◽  
Inflation Rates ◽  
Johansen Cointegration ◽  
Long Run Equilibrium

Purpose This paper aims to examine the effect of both inflation rate and interest rate on stock prices using quarterly data on non-financial firms listed in DJIA30 and NASDAQ100 for the period 1999-2016. The stock duration model is used to measure the sensitivity in variations in inflation rates and interest rates on stock prices. Design/methodology/approach The authors use standard statistical tools that include Johansen cointegration test, linearity, normality tests, cointegration regression, Granger causality and vector error correction model. Findings The results of panel Johansen cointegration analysis show that cointegration exists between the stock prices, the changes in stock prices due to inflation rates and the changes in stock prices due to real interest rates. The results of cointegration regression show that inflation rates are negatively associated with stock prices, the real interest rates and stock prices are positively associated, changes in real interest rates and inflation rates Granger cause significant changes in stock prices, significant speed of adjustment to long run equilibrium between observed stock prices and real interest rates and significant speed of adjustment to long run equilibrium between changes in stock prices due to real interest rates and changes in inflation rates. Originality/value This paper contributes to the empirical literature in three ways. The paper examines the effects of inflation and interest rates on stock prices differently from other related studies by separating inflation from real interest rates. The paper examines the causality between stock prices, interest and inflation rates. This paper offers significant updated validity to extended literature that a negative association exists between stock prices and inflation rates. This validity can be considered as an existence a theory of stock prices, inflation rates and interest rates.

scholarly journals Manajemen Inflasi Indonesia Menuju Optimalitas Growth Ekonomi Nasional

2002 ◽  
Vol 3 (1) ◽  
pp. 41-68
Author(s):  
Ibrahim Kholilul Rohman Havid Rozaq ◽  
Satria Utama Soekardjono ◽  
Nurkholis Mahfudz
Keyword(s):  
Negative Relationship ◽  
Economic Cost ◽  
Global Market ◽  
Sustainable Growth ◽  
Growth Potential ◽  
Current View ◽  
Long Run ◽  
Inflation Rates ◽  
The World ◽  
High Inflation

In the economic literature, the relationship between the growth and inflation has been discussed in different ways with respect to the development stages of the world economy. According to the current view, there is a negative relationship between growth and inflation. This seems to be compatible with the fact that the investments and the economic growth have been negatively affected by the high and chronic inflation rates. Thus, improvement of the long-run growth potential depends on the elimination of the uncertainties that stems from high inflation rates. Developments in commodity, service and financial markets necessitate the countries to perceive the world as a global market. The countries (or provinces in our study now) that appraise this  process of decentralizations could improve their living standards economically and socially if and only if they manage inflation well hence the economic cost and social cost both are minimize for sustainable growth in each province.

scholarly journals Equilibrium Real Exchange Rate and Misalignment: The Sierra Leone Perspective

2021 ◽  
Vol 8 (3) ◽  
pp. 41
Author(s):  
Abu Bakarr TARAWALIE
Keyword(s):  
Exchange Rate ◽  
Sierra Leone ◽  
Government Expenditure ◽  
Unit Root Test ◽  
Real Effective Exchange Rate ◽  
The Real ◽  
Long Run ◽  
Effective Exchange ◽  
Effective Exchange Rate ◽  
Long Run Equilibrium

This paper estimates the equilibrium real effective exchange rate and determine the level of exchange rate misalignment in Sierra Leone, for the period 1980 to 2018. The paper utilizes the behavioral equilibrium exchange rate methodology within the Johansen maximum likelihood framework to estimate the long run equilibrium real effective exchange rate. The unit root test result shows that all the variables are integrated of order one, whilst the cointegration test establishes the existence of one cointegrating vector as evidenced by both the Trace and Maximum Eigen Statistics. The normalized long run results reveal that openness, government expenditure and money supply were the most significant determinants of the real effective exchange rate in the long run. Furthermore, the findings reveal that the real effective exchange rate experienced sustained deviation from the long run equilibrium real effective exchange rate during the study period, with episodes of overvaluation and undervaluation. Specifically, the real effective exchange rate was overvalued by 3.69 percent during the period between 1980-1985; undervalued by 1.8 percent between 1986-1997, and overvalued by 0.9 percent between 1998-2004, Thus, the paper reveals episodes of misalignment of the real effective exchange rate. Based on these findings, the study recommends that, the monetary authorities should ensure stability of the exchange rate and maintain price stability, through sterilization of capital flows as well as contain money growth within the statutory limit.

From Main Street to Wall Street

2021 ◽  
Author(s):  
Jesper Rangvid
Keyword(s):  
Economic Growth ◽  
Stock Market ◽  
Business Cycle ◽  
Financial Markets ◽  
Stock Returns ◽  
Economic Activity ◽  
Wall Street ◽  
Business Cycle Fluctuations ◽  
Main Street ◽  
Long Run

From Main Street to Wall Street examines the relation between the economy and the stock market. It discusses the academic theories and empirical facts, and guides readers through the fascinating interaction between economic activity and financial markets. Itexamines what causes long-run economic growth and shorter-term business-cycle fluctuations and analyses their impact on stock markets. From Main Street to Wall Street also discusses how investors can use knowledge of economic activity and financial markets to formulate expectations to future stock returns. The book relies on data, and figures and tables illustrate arguments and theories in intuitive ways.In the end, From Main Street to Wall Street helps academic scholars and practitioners navigate financial markets by understanding the economy.

Introduction

2021 ◽  
pp. 1-6
Author(s):  
Jesper Rangvid
Keyword(s):  
Economic Growth ◽  
Business Cycle ◽  
Stock Returns ◽  
Economic Activity ◽  
Final Part ◽  
Stylized Facts ◽  
Long Run ◽  
Key Concepts ◽  
The Business Cycle

Chapter 1 contains an overview of the book. Part I introduces key concepts, definitions, and stylized facts regarding long–run economic growth and stock returns.Part II analyses the relation between economic growth and stock returns in the long run. Part III examines the shorter-horizon relation between economic growth and stock returns: the relation over the business cycle. Part IV explains how to make reasonable projections for economic activity, both for the short and the long run. Part V deals with expected future stock returns. The final part, a short one including one chapter only, explains how one can use the insights from the book when making investments.

scholarly journals An Empirical Analysis of Macroeconomic Variability on the Ghanaian Stock Market: A Vector Autoregression Approach

2016 ◽  
Vol 3 (2) ◽  
pp. 49
Author(s):  
Beverly Acquah
Keyword(s):  
Stock Market ◽  
Interest Rates ◽  
Stock Prices ◽  
Economic Activity ◽  
Price Index ◽  
Vector Autoregression ◽  
Negative Relationship ◽  
Commodity Prices ◽  
Commodity Price ◽  
Macroeconomic Indicators

This study investigates the dynamic interrelationships among stock prices and selected macroeconomic indicators namely; economic activity, global commodity price index, inflation and interest rates in Ghana. By employing a Vector Autoregression (VAR) Model, the empirical results reveal that stock prices depreciate with an increase in global commodity prices and interest rates indicating a negative relationship. On the other hand, stock prices appreciate with an increase in inflation and economic activity indicating a positive relationship. Examining stock market variability on the selected macroeconomic variables also showed that inflation and interest rates respond negatively to changes in asset prices while the stock market itself is not found to be a leading indicator for economic activity. The evidence suggests that the listed equities on the GSE are a hedge against inflation in Ghana. Increasing economic activity over time is advantageous for the Ghanaian stock market.

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