Journal of Applied Business Research (JABR)

Asymmetric Effects Of Inflation On Stock Market Prices: New Empirical Evidence Using Greek Data

Katrakilidis Constantinos, Lake Andreas Ektor, Trachanas Emmanouil

Abstract


Since economic theory establishes a relationship between stock market returns and inflation rate, we attempt to re-evaluate the above relationship for Greece considering the possibility of nonlinearities. In particular, empirical analysis is based upon the nonlinear cointegration framework and applies the asymmetric ARDL cointegration methodology, following previous work by Shin, Yu and Greenwood-Nimmo (2011). In doing so, we permit a much richer degree of flexibility in the dynamic adjustment process toward equilibrium, than in the classical case of a linear model. Our findings present evidence of asymmetric adjustment around a unique long-run equilibrium.


Keywords


Greek Inflation; Greek Stock Market Returns; Asymmetric ARDL Cointegration

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DOI: http://dx.doi.org/10.19030/jabr.v28i3.6952