GENERALIZED FISHER HYPOTHESIS VALIDITY FOR CANADA, UK, AND SUISSE STOCK MARKETS: EVIDENCE FROM PANEL ARDL MODELS
GENERALIZED FISHER HYPOTHESIS VALIDITY FOR CANADA, UK, AND SUISSE STOCK MARKETS: EVIDENCE FROM PANEL ARDL MODELS

Summary/Abstract: In this paper we propose a decision support tool for the investor in terms of asset allocation. The key question is to know whether equities are perfect hedge against inflation if either we invest in only one market or if we go to all the considered markets. We chose three democratic countries having common monetary policy based on the Inflation rate stabilization targeting (including Canada, UK, and Suisse) over the period 1999M01-2018M04. We see how the stock return evolution is related to inflation rate Pre, during, and Post 2008 Global financial crisis (GFC). Then, some dynamic version of the Generalized Fisher hypothesis (GFH) models are explored by some univariate and panel autoregressive dynamic linear (ARDL) frameworks. We conclude that during crisis period, being on either Suisse or Canadian stock market, investors can have important abnormal gains. Then including the UK in a portfolio allows investors to limit losses caused by inflation in the UK stock market alone.

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