Relationship between Inflation and Stock Returns – Evidence from BRICS markets using Panel Co integration Test

2015 ◽  
Vol 1 (1) ◽  
pp. 647 ◽  
Author(s):  
Vanita Tripathi ◽  
Arnav Kumar
Keyword(s):  
Stock Returns ◽  
Unit Root ◽  
Negative Relationship ◽  
Unit Root Test ◽  
Stock Index ◽  
Stationary Characteristic ◽  
Long Run ◽  
Integration Test ◽  
Short Run

Stocks are generally considered to be a good hedge against inflation because of their tendency to move together. This paper examines long term relationship between inflation and stock returns in BRICS markets using panel data for the period from March 2000 to September 2013. Correlation results reveal a significant negative relationship between stock index and inflation rate for Russia and a significantly positive relationship for India & China. ADF, PP and KPSS unit root tests indicate non-stationary characteristic of the data. Further we find no long term co-integrating relationship between stock index values and inflation rates using Pedroni panel co integration test. These findings have important implications for policy makers, regulators and investment community at large. There may seem to be short term contemporaneous relationship between inflation and equity returns but in the long run they do not seem to be significantly integrated. Changes in inflation may bring some short run movement in stock return but certainly equity does not seem to be a good hedge against inflation in long run at least in emerging BRICS markets.                       Keywords:  BRICS, Stock Index, Inflation, Unit root test, Pedroni Panel Co integration Test, Johansen Co integration Test.

scholarly journals A study on Co-integration of Pakistani Stock Market with selected Asian Stock Markets

2014 ◽  
Vol 1 (4) ◽  
pp. 18-24
Author(s):  
Anjum Shezad ◽  
Farzand Ali Jan ◽  
Saqib Gulzar ◽  
M. Akram Ansari
Keyword(s):  
Stock Market ◽  
Stock Markets ◽  
Stock Exchange ◽  
Unit Root Test ◽  
Equity Markets ◽  
Stock Index ◽  
Taiwan Stock Exchange ◽  
Integration Test ◽  
Short Run

Pakistani Equity Market has seen many ups and downs since the last two decades. The local investors are feeling themselves much insecure in indigenous investment. The reasons behind are political instability, severe power crises and terrorism which compelled the local investors to go across boarder and need to explore the multiple option of investment in international securities to minimize the investment risk. The main purpose and scope of this study is to explore causal and dynamic linkages of Karachi Stock Exchange, KSE-100 index (Pakistan) with emerging stock markets of Nikkei-225 (Japan), Shanghai Stock Exchange, SSE (China), Kuala Lumpur Stock Exchange, KLSE (Malaysia) and Taiwan Stock Exchange Corporation, TSEC Taiwan. The most recent data is taken from January, 2001 to December, 2013. Monthly stock index observations are taken. Descriptive statistics, Correlation Analysis, Unit Root Test, VAR, Co-integration Test, VECM Test are used to identify the presence of short-term as well as long-term associations. Empirical results indicate that KSE-100 is a volatile market and have suitable level of returns. Moreover, KSE-100 index has not long-term relationship with Japan, Malaysia, Taiwan and China but Taiwan, China and Japan has short run relationships to KSE. The findings conclude that there is a further need of future study to explore the factors of economic integration amongst these equity markets. The study overall exhibits awareness not only for economic and financial decision makers but also for international as well as regional investors about the benefit opportunities of portfolio diversification in these equity markets, funds management and trends of the stock market.

scholarly journals MONETARY POLICY AND TELECOMMUNICATION OUTPUT IN NIGERIA

2020 ◽  
Vol 3 (2) ◽  
pp. 62-73
Author(s):  
John Abiodun Akinde ◽  
Elijah Oludayo
Keyword(s):  
Monetary Policy ◽  
Money Supply ◽  
Negative Relationship ◽  
Negative Influence ◽  
Favourable Effect ◽  
Data Series ◽  
Long Run ◽  
Integration Test ◽  
Short Run ◽  
Positive Effect

Different policies impact on the growth of the telecommunication sector in Nigeria. One of these policies which influence the expansion or contraction of the telecommunication output is monetary policy. To this end, this research examined the effect of monetary policy on telecommunication output in Nigeria. For the purpose of analysis, time series secondary data were sourced from Central Bank of Nigeria (CBN) statistical bulletin covering the periods1986 to 2018. Autoregressive Distributed Lag (ARDL) technique was employed after examining the stationarity of the data series using Augmented Dickey-Fuller technique. The bound co-integration test revealed that there is long run equilibrium between the monetary policy variables employed and telecommunication output. The ARDL result revealed that money supply had significant and positive effect on telecommunication output in the short and long run; liquidity ratio produced an insignificant and negative relationship with telecommunication output in the short run and insignificant positive effect in the long run; exchange rate had insignificant negative effect in the short run and a significant positive effect on telecommunication output in the long run; consumer price index had significant negative influence on telecommunication outputboth in the short run and long run. The study concluded that monetary policy stimulates telecommunication output in Nigeria. Thus, it was recommended that the monetary authority should pursue an expansionary monetary policy to sustain the positive influence of money supply on telecommunication output in Nigeria while rolling out policy to reduce the liquidity ratio of banks in the short run but increase it in the long run so that the long term favourable effect of liquidity ratio can be felt on telecommunication output.  

scholarly journals ANALISIS HUBUNGAN PENDAPATAN WISATAWAN DAN HARGA PARIWISATA TERHADAP PERMINTAAN PARIWISATA DENGAN VECM

2016 ◽  
Vol 5 (2) ◽  
pp. 44
Author(s):  
MERARY SIANIPAR ◽  
NI LUH PUTU SUCIPTAWATI ◽  
KOMANG DHARMAWAN
Keyword(s):  
Unit Root ◽  
Unit Root Test ◽  
Cointegration Test ◽  
Tourism Demand ◽  
Long Run ◽  
Negative Effect ◽  
Short Run ◽  
The Relationship ◽  
Positive Effect

Tourism demand is focused on estimating variables which influence tourist visit. The tourism demand that we discuss on this research is the tourism demand to Bali of the major tourism-generating country was Australia. The aim of this research is to analyze the relationship between tourist income and tourism price to tourism demand using VECM. VECM requires that the variables in the model must be stationary and fulfilled a cointegration condition. In order to make it valid, the stationarity of variables in the model have to be checked using ADF unit root test. In additon, cointegration between these variables are examined using Johansen’s cointegration test. The results of ADF unit root test show that indicated the tourist income, the tourism price and the tourism demand for Australia data are stationary in first lag or I(1). Cointegration test shows that all variables are cointegrated, i.e. have a long-run relationship. In the long-run, the tourist income and tourism price give positive effect to the tourism demand. This means, the increase of tourist income and tourism price will contribute to the increase in tourism demand. In addition, in the short-run, the tourist income and the tourism price give negative effect to the tourism demand. This means, the increase of tourist income and tourism price will contribute to the decrease in tourism demand.

scholarly journals TOURISM DEMAND FOR BALI-THE HEGY APPROACH FOR SEASONAL UNIT ROOT TEST

2012 ◽  
Vol 11 (1) ◽  
Author(s):  
Ida Bagus Made Wiyasha
Keyword(s):  
Exchange Rates ◽  
Unit Root ◽  
Unit Root Test ◽  
Wald Test ◽  
Cusum Test ◽  
Parameter Instability ◽  
Economic Role ◽  
Long Run ◽  
Inflation Rates ◽  
Short Run

Tourism plays an important economic role for a destination. This study aims to investigate the behavior of seasonal direct tourist arrivals to Bali. To achieve the aforementioned objective archival data of direct tourist arrivals to Bali from 2001 to 2010 were used. Error Correction Model (ECM) and HEGY approach were applied to analyze the behavior of seasonal tourist arrivals. Wald test was applied in joint test for quarterly parameter. Cusum test were applied to examine the parameter stability for the periods mentioned above. USA, UK, and Japan tourist arrivals were the dependent variables while exchange rates and inflation rates for those mentioned countries were independent variables of the model. The findings of the study are as follows. The ECM results for Japan revealed that in the short run and the long run as well the exchange and inflation rates were negatively related to arrivals. For UK, in the short run exchange rates negatively related to arrivals while inflation rates exhibited positive relation to arrivals. For the US, all exchange rate and inflation rates were positively related to arrivals. Cusum test revealed the following. Japan arrivals exhibited relatively stable parameter for the periods of 2001-2010. UK arrivals showed parameter instability; while US arrivals experienced relatively stable parameter for the periods mentioned earlier. Wald test results showed that all arrivals, USA, UK, and Japan contained a unit root for their quarterly data.

scholarly journals MEASURING CO-MOVEMENT OF REAL INTEREST RATE AND INFLATION RATE: USING VEC APPROACH

2020 ◽  
Vol 7 (6) ◽  
pp. 66-76
Author(s):  
Md. Rasel Hossain ◽  
Ahsanul Haque ◽  
Md. Abdullah Amir Hamja ◽  
M. Shohel Rana
Keyword(s):  
Causal Relationship ◽  
Unit Root ◽  
Unit Root Test ◽  
Testing Procedure ◽  
Vector Error Correction ◽  
Unit Root Testing ◽  
Vec Model ◽  
Long Run ◽  
Short Run ◽  
Johansen Cointegration Test

It is important to know the future movement of economic variables for the planning and development of a country, Vector Error Correction (VEC) Model has been applied to disclose hidden long run as well as short-run patterns of the selected variables. ADF unit root testing procedure was applied to satisfy the conditions of applying the VEC Model. Using Johansen cointegration test long-run cointegration has been justified. But the VEC model reveals that long run significant causal relationship between the variables whereas there is no short-run causal relationship. The parameter was estimated using the OLS estimation technique. The validity of the model was confirmed by applying different quantitative approaches such as normality test, autocorrelation test, Portmanteau test, Unit root test, and various graphical approaches which suggested model selection and estimation were correct. The result of this present study may help Govt. agencies as well as planners to take an idea.

scholarly journals Co-integration Test: An Application to Selected Sorghum Markets in Sudan

2018 ◽  
Vol 10 (6) ◽  
pp. 383
Author(s):  
Abda Abdalla Emam ◽  
Nagat Ahmed Elmulthum ◽  
Amal Saeed Abass
Keyword(s):  
Market Integration ◽  
Wholesale Price ◽  
Unit Root Test ◽  
Correction Model ◽  
Good Communication ◽  
Price Series ◽  
Long Run ◽  
Integration Test ◽  
Short Run ◽  
Long Run Equilibrium

An attempt was made in the study to understand the nature of the market integration. The study was based mainly on monthly wholesale price of sorghum in four market locations; namely Khartoum, Elobied, Gdarif and Damazin. Sorghum wholesale price series was used for the period from January 2012 to December 2016. Unit root test, Johnson co-integration test and Error Correction model were used to disclose stationary series, the long run relationship and short run relationship between these markets, respectively. The result showed that, long run relationship was indicated between all pairs of markets, except between Khartoum and Elobied market (consumption or deficit market). Long run equilibrium indicated adjustment to surplus markets (Gadarief and Damazin). This result may be interpreted by the fact that these markets are connected by good communication and transportation. From ECM model, Wholesale sorghum prices in all markets (higher price) quickly fall back towards Gadarif market whereas Gadarif adjusts back to Khartoum. Also, higher wholesale prices in Damazin quickly fall back towards all markets. There is short run causality running from: Gadarif and Damazin to Khartoum, Gadarif to Elobied and Khartoum to Damazin market. Long run equilibrium indicated adjustment to surplus markets (Gadarief and Damazin).This result may be reflected to good communication and transportation between the markets.

Co-Integration Analysis of Energy Consumption and Urbanization - An Empirical Study Based on Shandong Province

2014 ◽  
Vol 1073-1076 ◽  
pp. 1337-1340
Author(s):  
Yan Ren
Keyword(s):  
Energy Consumption ◽  
Empirical Study ◽  
Granger Causality ◽  
Unit Root Test ◽  
Shandong Province ◽  
Long Run ◽  
Equilibrium Relationship ◽  
Integration Test ◽  
Short Run ◽  
Integration Analysis

This paper used methods of co-integration analysis and Granger causality estimation to test the relationship between energy consumption and urbanization in Shandong province from 1995 to 2012. Econometric software—Eviews 6.0 was used during the calculation process. All the empirical study experienced several steps including unit root test, co-integration test, error correction model as well as Granger causality estimation. Despite the short-run fluctuation, the empirical study showed that there was a stable equilibrium relationship between energy consumption and urbanization in Shandong province in the long-run. Meanwhile there was a one-way causality relationship from energy consumption to urbanization in Shandong province. Under the background of energy shortage, several energy policies should be carried out to maintain the sustainable energy consumption and urbanization in Shandong province.

scholarly journals SMEs Formal Funding, a Lubricant for Economic Performance: The Nigerian Experience

2020 ◽  
pp. 1-10
Author(s):  
S. Sunday, Ogunbiyi ◽  
O. Chinyere, Onita
Keyword(s):  
Economic Performance ◽  
Unit Root ◽  
Small And Medium Enterprises ◽  
Unit Root Test ◽  
Secondary Data ◽  
Long Run ◽  
Integration Test ◽  
Auto Regressive ◽  
Medium Enterprises ◽  
The Relationship

This study examined the relationship between Small and medium scale enterprises formal sources of funding and economic performance of Nigeria, for the period 1992 to 2018. We adopted secondary data that were sourced from the central bank of Nigeria statistical bulletin. We conducted unit root test, Bound co-integration test and auto regressive distributive lag tests. The tests revealed that, in the long run, Microfinance Banks credit is statistically significant in promoting economic performance of Nigeria. While, Bank of Agriculture credit and bank of industry credit were found not to be statistically significant in promoting Nigeria’s economic performance. However, jointly, credits from the banks studied have a positive relationship with the performance of Nigeria’s economy as represented by the GDP. The study therefore recommends that, access to microfinance credit by SMEs should be sustained, while the relevant agencies should work to improve the relationship between credits by Banks of Agriculture and Industry to Small and Medium Enterprises. 

scholarly journals Relationship of working capital management and profitability of the firms - an application of unit root and co-integration test on the various corporate sectors of Pakistan stock exchange

2021 ◽  
Vol 12 (1) ◽  
pp. 377-394
Author(s):  
Umair Baig ◽  
Salman Sarwat ◽  
Danish Iqbal Godil
Keyword(s):  
Unit Root ◽  
Stock Exchange ◽  
Unit Root Test ◽  
Research Unit ◽  
Working Capital ◽  
Long Run ◽  
Integration Test ◽  
Future Direction ◽  
Relationship Of ◽  
The Impact

The main purpose of this research is to find the impact and the long-run relationship of working capital, and profitability in different major sectors of Pakistan stock exchange; for this purpose eight sectors with 95 listed companies selected that can be representative of the Pakistani mindset and practices of the corporate world. For this reason, ROA used as the dependent variable and CCC, CR, QR, WCT ART, APD, ROCE, DR to check the long-run relationship with Firm Performance. OLS is not possible due to the trend in data. In this research unit root test and Penal Co-integration test used for finding the long-run relationship equilibrium. This research paper provides guidelines to corporate practitioners and academia to understand and focus on working capital to improve profitability in the organization. Findings revealed that different sectors have different characteristics of working capital in the long-run equilibrium. This research intends to give future direction for the researcher to develop theories of liquidity and working capital.

scholarly journals MEASURING CO-MOVEMENT OF REAL INTEREST RATE AND INFLATION RATE: USING VEC APPROACH

2020 ◽  
Vol 7 (6) ◽  
pp. 66-76
Author(s):  
Md. Rasel Hossain ◽  
Ahsanul Haque ◽  
Md. Abdullah Amir Hamja ◽  
M. Shohel Rana
Keyword(s):  
Causal Relationship ◽  
Unit Root ◽  
Unit Root Test ◽  
Testing Procedure ◽  
Vector Error Correction ◽  
Unit Root Testing ◽  
Vec Model ◽  
Long Run ◽  
Short Run ◽  
Johansen Cointegration Test

It is important to know the future movement of economic variables for the planning and development of a country, Vector Error Correction (VEC) Model has been applied to disclose hidden long run as well as short-run patterns of the selected variables. ADF unit root testing procedure was applied to satisfy the conditions of applying the VEC Model. Using Johansen cointegration test long-run cointegration has been justified. But the VEC model reveals that long run significant causal relationship between the variables whereas there is no short-run causal relationship. The parameter was estimated using the OLS estimation technique. The validity of the model was confirmed by applying different quantitative approaches such as normality test, autocorrelation test, Portmanteau test, Unit root test, and various graphical approaches which suggested model selection and estimation were correct. The result of this present study may help Govt. agencies as well as planners to take an idea.

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