Open AccessAsymmetric Effects Of Inflation On Stock Market Prices: New Empirical Evidence Using Greek Data
Author(s) -
Constantinos Katrakilidis,
Lake Andreas Ektor,
Emmanouil Trachanas
Publication year - 2012
Publication title -
journal of applied business research
Language(s) - English
Resource type - Journals
eISSN - 2157-8834
pISSN - 0892-7626
DOI - 10.19030/jabr.v28i3.6952
Subject(s) - cointegration , economics , econometrics , inflation (cosmology) , stock market , empirical evidence , flexibility (engineering) , stock (firearms) , financial economics , mechanical engineering , paleontology , philosophy , physics , management , epistemology , horse , theoretical physics , engineering , biology
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.