Title: Does common stock hedge against inflation in G7 countries? A co-integration analysis

Authors: Noureen Adnan, Qaisar Abbas

Addresses: University of Surrey, Guildford, Surrey GU2 7XH, UK; Department of Management Sciences, Comsats Institute of Information Technology, Islamabad, Pakistan. ' Department of Management Sciences, Comsats Institute of Information Technology, Islamabad, Pakistan

Abstract: Inflation shock is always alarming as it can hurt the economy in different ways. The current study examines whether investments in stocks can hedge against inflation in G7 economies. Our empirical analysis is based upon Fisher hypothesis. Unit roots and Engle-Granger tests are applied to examine the stationarity and co-integration. It is found that four countries including UK, France, Germany and Canada has completely hedge against inflation during the sample period. These countries have also shown stability in their consumer price index and stock price index at first difference and found co-integrated.

Keywords: common stocks; inflation; hedging; hedge against inflation; co-integration; stock investment; G7; stationarity; co-integration; UK; United Kingdom; France; Germany; Canada; consumer price index; stock price index; stability.

DOI: 10.1504/JGBA.2011.040335

Journal for Global Business Advancement, 2011 Vol.4 No.1, pp.70 - 83

Published online: 24 May 2011 *

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