Academy of Accounting and Financial Studies Journal (Print ISSN: 1096-3685; Online ISSN: 1528-2635)


Inflation and stock market prices: A review from a developing countrys perspective

Author(s): Simon Akumbo Eugene Mbilla, Isaac Luke Agonbire Atugeba, Solomon Awariya, Raymond Awonatezuaka Achiyaale

The purpose of the study was to examine the effect of inflation on stock market prices in Ghana. The study used monthly time series data from 2006 to 2016, which was sourced from the World Development Indicator (WDI) and the Bank of Ghana (BOG). The data was converted to Quarterly data between 2006Q1 to 2016Q4. Multiple iregression ianalysis, ispecifically, iOrdinary iLeast iSquare (OLS) itechnique iwas iemployed i ito iestablish ithe irelationship ibetween iinflation iand istock imarket iprices. The istudy ifound ian iexisting ipositive irelationship ibetween iinflation iand istock imarket iprices iin Ghana. When iinflation irate iincreases, istock iprices ialso iincrease ion ithe iGhana ibourse. This imeans a ibullish imarket iis inot ialways iindicative iof ia irobust ieconomy. i Also, ithe iperformance iof ithe ireal isector iwas ifound ito ihave ian iinverse irelationship iwith ithe icapital imarket. By inference, iit imay ibe iassumed ithat iinvestors iopt ifor ithe icapital imarket iin itimes iwhen ibusiness iactivities iin ithe ireal isector ibecome islow iand iunattractive. iThe igovernment iof iGhana iand ipolicy imakers ishould ipay iattention ito iinflation itargeting iand ikeeping iinflation iin icheck, ias ifailure ito ido ithis, imay ilead ito ia i‘false’ ibullish imarket.

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