DETERMINING THE RELATIONSHIP BETWEEN STOCK RETURNS AND INFLATION –EVIDENCE FROM THE GHANA STOCK EXCHANGE

The purpose of the study is to determine the relationship between stock returns and inflation using evidence from the Ghana Stock Exchange. The ARDL bound test technique was used to find the long and short run relationships between stock returns and inflation. The result shows co-integration relationship between stock returns and inflation. It shows that inflation has a positive and significant relationship with stock returns represented by GSE-ASI. So, inflation, as one of the macroeconomic variables, can be said to have influence on investment and the decisions that investors make, and so policy makers should pay critical attention to inflation. More so, looking at the result for the period used, the result is in line with fisher’s effect of inflation having a positive effect on stock returns.