The nature of the relationship between inflation and the performance of the stock market of the Gulf Cooperation Council states

Abstract

This study examined the nature of the relationship between inflation and the performance of the stock market of the Gulf Cooperation Council states, during the period 1996-2018, with the aim of showing this relationship in the short and long term, And the extent of the ability of GCC stock markets to restore balance again in the event of any inflation shock, To achieve this goal, we analyzed annual data on the rate of inflation and change in the return of the market index using the PANEL data, By applying Pooled Regression Model (PRM), To determine the extent of a longterm balanced relationship between inflation and the return of the financial market index in seven financial markets of the Gulf Cooperation Council countries, This was followed by an estimate of the Auto-Regressive Distributed Lag( ARDL), As the results of the study indicated a long-term balance relationship between inflation and the returns of stock market indicators for the Gulf Cooperation Council countries, The study also indicated that the process of correcting the imbalance and returning to equilibrium in the event of any inflationary pressures taking place quickly, as this processtakes a yearwith a rate of 85% correction