Long-run equilibrium adjustment between inflation and stock market returns in South Africa: a nonlinear perspective Online publication date: Fri, 09-Dec-2016
by Andrew Phiri
International Journal of Sustainable Economy (IJSE), Vol. 9, No. 1, 2017
Abstract: Following the global financial crisis of 2007-2008, the empirical investigation into financial variables affecting the performance of stock markets gained prominence in empirical research. This study investigates the asymmetric cointegration effects of inflation on the stock market returns for the Johannesburg Stock Exchange (JSE) using monthly data collected from 2003:01 to 2014:12. The empirical model used in the study is the momentum threshold autoregressive (MTAR) model. Indeed, our results reveal a negative, nonlinear cointegration relationship between inflation and stock returns in South Africa with causality running unidirectional from inflation to stock returns. The results further suggest that investors cannot hedge against rising inflation by investing in equity stocks listed on the JSE. Second, monetary policy, through the use of inflation targets, can provide a stable financial environment for the growth of equity markets in South Africa.
Existing subscribers:
Go to Inderscience Online Journals to access the Full Text of this article.
If you are not a subscriber and you just want to read the full contents of this article, buy online access here.Complimentary Subscribers, Editors or Members of the Editorial Board of the International Journal of Sustainable Economy (IJSE):
Login with your Inderscience username and password:
Want to subscribe?
A subscription gives you complete access to all articles in the current issue, as well as to all articles in the previous three years (where applicable). See our Orders page to subscribe.
If you still need assistance, please email subs@inderscience.com
Our Blog 
Follow us on Twitter 
Visit us on Facebook