This study investigates the relationship between stock returns and income inequality in South Africa, a country marked by persistently high levels of income disparities and a sophisticated and structurally unique financial market. Despite the Johannesburg Stock Exchange (JSE) being one of the most developed and liquid markets in Africa, stock ownership remains limited to a small segment of the population, often reinforcing pre-existing income inequalities. This study determines the relationship between stock returns and income distribution using the ARDL bound test methodology. Using time series data from 1975 to 2024, the study examines the extent to which stock market returns influence income distribution. The findings of the study suggest a positive relationship between stock returns and income distribution. This relationship suggests that higher stock market development disproportionately benefits capital holders. The long-term relationship seems to have limited feedback from inequality to stock returns. The findings aim to inform policies on inclusive financial participation and broad-based wealth generation to address South Africa’s structural inequalities.
Magwedere et al. (Wed,) studied this question.