The long-run relationship between stock returns and inflation in developing countries: Further evidence from a nonparametric cointegration test

This study indirectly examines the issue of potential nonlinear long-run relationship between stock returns and inflation for 18 developing countries using recent developments in the theory of nonparametric cointegration. The empirical results found evidence of a nonlinear adjustment towards the long-run relationship between stock returns and inflation for 13 out of the 18 developing countries considered in this study. These findings are tentatively interpreted as adding to the recent evidence of nonlinearities in the relationship between stock returns and inflation.