Inflation threshold effects on stock prices: Evidence from the plantation sector in Malaysia

Vui, Ken Wong and Saizal Pinjaman (2025) Inflation threshold effects on stock prices: Evidence from the plantation sector in Malaysia. Business and Economic Research, 15 (1). pp. 148-161. ISSN 2162-4860

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Abstract

This study aims to examine the threshold effect of inflation on stock prices in the Malaysian plantation sector. This study used earnings per share (EPS) and return on equity (ROE) as proxies for microeconomic variables, and inflation (INF which proxies for the consumer price index) as a proxy for macroeconomic variables. A panel dataset covering 32 listed companies in the plantation sector from 2008Q3 to 2023Q3 is used. The results of threshold analysis show that inflation has a nonlinear effect, with a threshold value of 4.6128%. This implies that when inflation crosses this value, it significantly alters the outcome of stock prices. Inflation consistently has a negative effect on stock prices across both regimes, although the impact slightly decreases under higher inflation. Higher inflation will increase the detrimental effects of ROE and reverses the significance effect of EPS and DTE to insignificant, while enhancing the positive contributions of revenue and operating cash flow.

Item Type:	Article
Keyword:	Stock prices, Inflation, Threshold analysis
Subjects:	H Social Sciences > HB Economic theory. Demography > HB1-3840 Economic theory. Demography > HB201-206 Value. Utility H Social Sciences > HG Finance > HG1-9999 Finance > HG4501-6051 Investment, capital formation, speculation
Department:	FACULTY > Faculty of Business, Economics and Accounting
Depositing User:	SITI AZIZAH BINTI IDRIS -
Date Deposited:	27 May 2025 09:34
Last Modified:	27 May 2025 09:34
URI:	https://eprints.ums.edu.my/id/eprint/43926

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