Inflation hedging effectiveness of an emerging Asian market: the case of Malaysia
by Mansor H. Ibrahim
International Journal of Economics and Business Research (IJEBR), Vol. 3, No. 5, 2011

Abstract: This paper empirically examines the inflation-hedging property of an emerging stock market, Malaysia, for full sample (1988–2008), pre-crisis sample (1988–1996) and post-crisis sample (1999–2008) by means of asymmetric cointegration and asymmetric error-correction modelling. The focus is on the long-run relation between stock prices and consumer prices, the adjustment speed of the stock market to restore the long-run relation and their short run interactions. From the analyses, we uncover evidence supporting the long-run inflation-hedging ability of the Malaysian stock market only during the pre-crisis period. Its hedging ability, however, weakens for the full sample and is absent post-crisis. In the short run, we note that rising inflation tends to be followed by stock market decline.

Online publication date: Wed, 22-Apr-2015

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