Journal article
Revisiting the Link Between Stock Prices and Goods Prices in OECD Countries
Australian Economic Papers, Vol.54(3), pp.135-150
2015
Abstract
Fisher hypothesis postulates positive relation between stock return and inflation; however early studies document negative relationship between the two and they conclude that stock cannot be used as a hedge against inflation. In this paper we explore long-run nonlinear relationship between stock price and goods price. Our sample consists of 19 OECD countries; all or some of these countries have been studied before with the findings of linear cointegration between the stock index and goods price index. Based on unit root tests and linear cointegration test, we apply threshold cointegration tests, Autoregressive Distributed Lag (ARDL) cointegration test and panel VAR method. With all these econometric methods we arrive at heterogeneous findings as follows: two countries have linear cointegration, five countries have threshold cointegration, nine countries do not have any cointegration and finally two countries provide inconclusive results. Estimates of Fisher coefficient provided by linear and nonlinear cointegration methods, which range between 1.27 and 1.86, are consistent with previous studies. Impulse response analysis from panel VAR for countries having no cointegrating relation shows that shock to inflation produces negative response in stock return, which supports findings of earlier studies.
Details
- Title
- Revisiting the Link Between Stock Prices and Goods Prices in OECD Countries
- Authors/Creators
- K. Hassan (Author/Creator) - Murdoch UniversityA. Hoque (Author/Creator) - Murdoch UniversityA. Rao (Author/Creator) - University of Dubai
- Publication Details
- Australian Economic Papers, Vol.54(3), pp.135-150
- Publisher
- Wiley
- Identifiers
- 991005540044607891
- Copyright
- Flinders University and University of Adelaide and Wiley Publishing Asia Pty Ltd.
- Murdoch Affiliation
- School of Management and Governance
- Language
- English
- Resource Type
- Journal article
- Note
- Online September 215
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