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How Inflation and Interest Rates Affect Stock Returns of Concentrated Companies and Competitive Companies in the United Kingdom

How Inflation and Interest Rates Affect Stock Returns of Concentrated Companies and Competitive Companies in the United Kingdom

ByFarrukh Khan

This study presents an attempt to examine the relationship that exists between inflation, interest rate, stock price and stock returns for two stocks listed on the London Stock Exchange using time-series data and Granger causality tests. Five-year monthly historical data from January 2005 to the present used for the study is analysed using Stata, which has the built-in commands to perform the required time-series analysis. One of the selected stocks, the stock for British Telecom, represents a concentrated company while the other stock, that of Aberdeen Asset Management, represents a competitive company. Results of the analysis suggest that for the United Kingdom market, inflation and interest rate present a significant Granger relationship. However, because published literature on the impact of macroeconomic variables on the stock market presents conflicting evidence, previous studies both corroborate and refute the results of this study.

Details

Publication Date
Oct 1, 2011
Language
English
Category
Business & Economics
Copyright
All Rights Reserved - Standard Copyright License
Contributors
By (author): Farrukh Khan

Specifications

Format
PDF

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