Are ‘stock returns’ a hedge against inflation in Japan? Determination using ADL bounds testing

In this study, the ADL bounds test, developed by Pesaran <italic>et al.</italic> (2001), is used to test whether the Japanese stock market can provide a hedge against inflation based on monthly data over the period 2001M1 to 2011M7. Granger causality between stock market returns and inflation is also examined. The results of this study provide a reference for participants in developed stock markets and provide evidence that stock returns hedge against inflation.