The Relationship between Inflation and Stock Returns in Hungary, Poland and the Czech Republic from 1997 to 2018

• Main Authors: Zalan Sumegi, 蘇澤嵐
• Other Authors: Mo Wan-Shin
• Format: Others
• Language: en_US
• Published: 2018
• Online Access: http://ndltd.ncl.edu.tw/handle/55jzz3

碩士 === 中原大學 === 國際商學碩士學位學程 === 106 === Abstract In the following paper, a particular model had been designed to provide some key information about the relationship between stock returns and inflation in Hungary, Poland and the Czech Republic from 1997 to 2018. All countries have their own cultural, social and economic particularities, even though they share numerous common features such as having a conservative, eurosceptic leadership that is committed to protect their citizens’ national values and the nation’s monetary independence. As being former members of the Post-Soviet states and having three of the largest stock markets in the region, Hungary, Poland, the Czech Republic are great examples to illustrate how capitalism could take the place of socialism and benefitting from it. During the research, an attempt had been made to confirm the linkages between consumer prices and the rate of return on common stocks by using solely quantitative data. The inspection revolved around answering three major questions: is there a correlation between the two variables; if the correlation exists, what is the sign and whether is it different in the short run and the long run or not? To obtain the answers, a Vector Autoregression model (VAR) had been implemented to regress the different time series of the two variables on each other. In addition to that, multiple Granger Causality tests had been run for detecting deterministic properties of x and y. Finally, the paper carries out a Generalized Impulse Response Function analysis to examine the long-run relationship between stock returns and inflation. Based on the research findings, there is enough evidence to reject the null hypothesis about stocks are good investments in case of increasing prices in Hungary and Poland. Stock returns, though, do not cause inflation in any included countries; therefore, the second alternative hypothesis has been rejected. JEL codes: C22, E31 Keywords: inflation, VAR