Rates of return on common stocks in inflationary environment

Abstract

In this study rates of return on common stocks at increasing rate of inflation and at decreasing rate of inflation are examined. While ln the last few years a large number of studies related to inflation and rates of return on common stocks are undertaken, few analysis have been performed on this subject on Turkey. After reviewing the literature, Turkey's economical structure and the rates of return both ln nominal and real terms are analyzed. Then, we tested whether common stocks can hedge inflation during two subperiods, characterized with increasing and decraasinginflation rate. As a result, taking three-year holding periods, we can conclude, that common stocks cannot hedge investors against inflation at increasing rate of inflation.