STOCK RETURN AND INFLATIONIN KAZAKHSTAN, RUSSIA ANDUKRAINE

This paper examines the relationship between stock returns and inflation rates inthe context of the Fisher hypothesis inthe three CIS countries – Kazakhstan,Russia and Ukraine – using monthly dataon stock and goods prices over theperiod 2001M1-2012M10. Regression results indicate that although the estimatedcoefficients of current and expected inflation are correctly signedin all cases, thehypothesis holds precisely only in the case of Kazakhstan. Moreover, in the caseof Kazakhstan the coefficients of both current and expected inflation arestatistically significant andhigher than unity. The results from cointegration testsdo not confirm the existence of a longrun relationship between stock and goodsprices. However, a significant error correction representation exists for Russiashowing that it takes less than 2 yearsto restore the equilibrium between stockand goods prices. An important finding thatemerges from this study is that likestock markets in other countries the CIS stock markets do not tend to provide agood hedge against inflation