The Relationship between Inflation and Stock prices in Zambia
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Date
2013
Authors
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Journal ISSN
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Publisher
Asian online journals
Abstract
This study examines a relationship between inflation and stock prices for Zambia, over the period
1999–2011, using monthly all share stock prices and inflation rates. The study employed Augmented-Dickey-Fuller
and Phillip-Perron for testing the stationarity of the series, Granger-causality test is used to determine the causality
relationship between the variables, VAR and Cointegration techniques are employed to determine the short run and
long run relationship respectively between the two variables. The unit root test results show that the series are non-
stationary at level form but after differentiating they become stationary, the causality test results show a one way
causal relationship running from inflation to stock prices and not vice-versa. There was no cointegration found
among the variables meaning that there exists only a short run relationship. In general the results support the
economic theory which suggests a negative relationship between inflation and stock prices.
Description
Keywords
Inflation, Stock prices, unit root, Granger casuality, Vector-autoregressive, Zambia
Citation
Chidoti, D & Sheefeni, P. J. (2013) The Relationship between Inflation and Stock prices in Zambia. Asian Journal of Business and Management