Does common stock hedge against inflation in G7 countries? A co-integration analysis. (25th May 2011)

• Record Type: Journal Article
• Authors: Adnan, Noureen; Abbas, Qaisar
• Is Part Of: Journal for global business advancement. Volume 4:Number 1(2011)
• Page Start: 70
• Page End: 83
• Publication Date: 2011-05-25
• Subjects: 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; Business -- Periodicals; International business enterprises -- Periodicals; 650
• Languages: English
• ISSNs: 1746-966X

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.