The Influence Of Inflation On Stock Price

Abstract

This research has an objective to examine the Influence of Inflation on stock price in Indonesia, whether it is negative, positive orflat, in relation to the following macroeconomic variables: interest rate, money growth, oil price, gross domestic product, financial deregulation, and financial deficits. The research selects the populations and samples based on the purposive sampling. The test conducted by using a regression with stock price as a dependent variable, inflation as an independent variable, and interest rate, money growth, oil price, gross domestic product, financial deregulation, and financial deficits as control variables that is also included as independent variables. The results support the hypothesis that inflation has a negative effect onstock price. However, the control variables result is not consistent with the prediction. Although the control variables are notconsistent, they do not disturb the researcher's examination since it is not what the researcher focus on. An important implication of these findings is that since most of the factors unrelated to market fundamental are found to exert insignificant effect on stock prices, the Indonesian stock market canbe described likely to be an efficient.