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The effects of inflation are stated in the text book is “Distorts consumer behavior, Redistributes wealth, Redistributes incomes, Affects wage bargainers, Undermines business confidence, and weakens the external competitive position.” (The official CIMA learning system, CIMA business)

5. Previous literature reviews----------interest rate and stock return

Jensen and Mercer (2002) utilized metering method to analyze how discount rates affect on stock prices. He indicated that the unexpected interest rate changes can strongly stimulate the stock market, while the stock prices are hardly respond to expected interest rates as quickly as unexpected interest rates. So it is very important for us to identify and distinguish the unexpected and expected interest rates when researching the relationship. Fama (1990) studied the American market and revealed that in American stock market, stock prices had the long-term balance relation with interest rates. Mukherjee and Naka (1995), Maysam and Koh (2000) studied Japanese stock market and Singapore stock market in respectively, and worked out a similar conclusion with Fama that there was the long-term stable relation between stock prices and interest rates. Rahmn and Mutafa (1997) analyzed the cause-and-effect relationship between stock prices and interest rates in many countries; they came out a result that there might be a significant long run co-integration relationship. Neri (2001) believes that the changes on monetary policy were positively related to the fluctuation of stock prices because of liquidity effect. Speaking more specifically, monetary policies affect

The Assignment is provided by UK Assignment on the ability of money liquidity, as we all know, funds liquidity is a pivotal factor in the stock market. Therefore, he confirmed that monetary policy, such as interest rate changes plays a pivotal role in influencing on stock returns. Bernanke (1992) believe that in various monetary policy tools, interest rates adjustment had the most significantly influence on stock market. Campbell and Kyle (1988) believe that the monetary policy change resulted in interest rate changes, and it affected stock prices running through the expectation of stock dividends and the estimation of discount rate.

6. Previous literature reviews----inflation and stock return

The relationship between inflation and stock return always is a heated and controversial topic in macroEconomics and financial disciplines. Reviewing previous articles in this area, there are three plausible primarily opinions on the relationship between inflation and stock returns: positive correlation, negative correlation and uncorrelated relationship.

Barnes M. and Boyd J.H. and Smith.B.D. (1999) investigated and analyzed several countries data about inflation and stock prices and made a conclusion that under low level inflation or moderate inflation, inflation and nominal equity returns are negatively correlated or even uncorrelated. However, they also agree that inflation and nominal returns have a strongly positive relationship in a high inflation economic circumstance. He thinks that the strengths of inflation determine 本论文由英语论文网提供整理，提供论文代写，英语论文代写，代写论文，代写英语论文，代写留学生论文，代写英文论文，留学生论文代写相关核心关键词搜索。