The Park Place Economist


This paper aims to explore the correlation between how some macroeconomic and microeconomic variables, especially the Consumer Price Index (CPI), predict stock performance. CPI is an index measuring the price level of goods and services consumers buy, with social security benefits and inflation tied to this index (Little, 2012). This study derives the expected return in the stock market as a result of fluctuations in percentage change in CPI, which is defined as inflation.