Skip to main content

Research Repository

Advanced Search

Are common stocks a hedge against inflation?

Luintel, K.; Paudyal, K.

Authors

K. Luintel

K. Paudyal



Abstract

We test whether U.K. common stocks hedge against inflation using a framework of the tax-augmented Fisher hypothesis. Aggregate and disaggregate (seven industry groups) monthly data covering 48 years are used. All pairs of stock and retail price indexes are cointegrated. Tests in most cases reveal significant shifts in the cointegrating vectors, and accounting for these shifts improves the precision of the estimates. The point estimates of goods price elasticity are significantly above unity in all but two cases. These findings, though in sharp contrast to most existing findings that report price elasticity of below unity, appear theoretically more plausible because nominal stock returns must exceed the inflation rate to insulate tax-paying investors.

Citation

Luintel, K., & Paudyal, K. (2006). Are common stocks a hedge against inflation?. Journal of Financial Research, 29(1), 1-19. https://doi.org/10.1111/j.1475-6803.2006.00163.x

Journal Article Type Article
Publication Date Mar 1, 2006
Deposit Date Aug 19, 2008
Journal Journal of Financial Research
Print ISSN 0270-2592
Electronic ISSN 1475-6803
Publisher Wiley
Peer Reviewed Peer Reviewed
Volume 29
Issue 1
Pages 1-19
DOI https://doi.org/10.1111/j.1475-6803.2006.00163.x

You might also like



Downloadable Citations