Handbook of Frontier Markets

Chapter 2

Stock Returns and Inflation: The Case of Botswana

K. Gavriilidis^*

L.M. Kgari^***    University of Stirling Management School, Stirling, Scotland, United Kingdom^**    Bank of Botswana, Finance Department, Gaborone, Botswana

Abstract

This study examines the relationship between stock market returns and inflation in Botswana over the period 1998–2013. Theory suggests that stock returns should be positively related to inflation in order to compensate investors for the loss of their purchasing power. However, our study finds no evidence of a statistically significant relationship between stock market returns and inflation. In addition, we find no evidence of a long-run relationship between stock market returns and inflation.

Keywords

stock ...