Stock returns-inflation nexus in Africa during tranquil and crisis periods: New evidence

In this paper, we investigate the stock returns-inflation nexus covering the four major stock exchanges in Africa. We employ both the heterogenous and quantile panel regressions due to the possibility of variation in the slope parameters across countries and overtime. This assumption of heterogeneity is further validated by the Pesaran (2007) and Pesaran et al. (2013) tests involving cross-section averages. Thereafter, the analyses are singly conducted for both the pre- and post-global financial crisis (GFC) periods. Our findings suggest contrasting directions in the stock return-inflation nexus between the pre-GFC and postGFC periods implying that the nexus is episodic regardless of the composition of countries. Similar evidence is obtained for the panel quantile regression as the relationship between stock returns and inflation at different quantiles follows a descending order from lower quantile to upper quantile for the pre-GFC while the converse is noticed for the post-GFC.