Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/335327 
Year of Publication: 
2021
Citation: 
[Journal:] Entrepreneurial Business and Economics Review (EBER) [ISSN:] 2353-8821 [Volume:] 9 [Issue:] 4 [Year:] 2021 [Pages:] 131-146
Publisher: 
Krakow University of Economics, Centre for Strategic and International Entrepreneurship, Krakow
Abstract: 
Objective: The objective of the article is to empirically explore the effects of actual, expected, and unexpected inflation on conventional and Islamic stock markets in Indonesia. Research Design & Methods: In the first stage, an auto-regressive integrated moving average (ARIMA) model is utilized to measure expected and unexpected inflations. In the second stage, a dynamic ordinary least squares (DOLS) estimator is used to explore the stock return-inflation nexus over the period from 1999 to 2019. Findings: The study documented that Islamic stock returns are independent of inflation following the Fisher hypothesis. Meanwhile, a negative relationship between stock returns and inflation is found in the conventional stock market. However, the Fama proxy hypothesis was incapable of describing the negative conventional stock returns-inflation relation in its entirety. However, our findings support the Mundell-Tobin hypothesis. Implications & Recommendations: Our findings imply that the Islamic stock market of Indonesia provides a full hedge against actual, while the conventional stock market does not. Contribution & Value Added: This study is the first attempt in the Islamic finance literature to comparatively explore the effects of inflation, expected, and unexpected inflation on conventional and Islamic stock markets from the perspective of the emerging Indonesian economy.
Subjects: 
Fisher hypothesis
Fama proxy hypothesis
Islamic stock
hedge
JEL: 
C22
C58
G11
Persistent Identifier of the first edition: 
Creative Commons License: 
cc-by-nd Logo
Document Type: 
Article

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