Firm Characteristics, Unanticipated Inflation, and Stock Returns
AbstractThis paper reexamines the effects of nominal contracts on the relationship between unantici pated inflation and an individual stock's rate of return. This study differs in three main ways from previous research. First, announced i nflation data are used to examine the effects of unanticipated inflat ion. Second, a different specification is used to obtain more efficie nt estimates. Third, additional nominal contracts are considered. The empirical results indicate that time-varying firm characteristics re lated to inflation predominately determine the effect of unanticipate d inflation on a stock's return. A firm's debt-equity ratio appears t o be particularly important in determining the response. Copyright 1988 by American Finance Association.
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Bibliographic InfoArticle provided by American Finance Association in its journal Journal of Finance.
Volume (Year): 43 (1988)
Issue (Month): 4 (September)
Other versions of this item:
- V. Vance Roley & Douglas K. Pearce, 1988. "Firm characteristics, unanticipated inflation, and stock returns," Research Working Paper 88-01, Federal Reserve Bank of Kansas City.
- Douglas K. Pearce & V. Vance Roley, 1989. "Firm Characteristics, Unanticipated Inflation, and Stock Returns," NBER Working Papers 2366, National Bureau of Economic Research, Inc.
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- Kwon, Chung S. & Shin, Tai S., 1999. "Cointegration and causality between macroeconomic variables and stock market returns," Global Finance Journal, Elsevier, vol. 10(1), pages 71-81.
- Antonio Díaz & Francisco Jareño, 2013. "Inflation news and stock returns: market direction and flow-through ability," Empirical Economics, Springer, vol. 44(2), pages 775-798, April.
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- Levinsohn, J. & Mackie-Mason, J.K., 1989. "A Simple, Consistent Estimate For Disturbance Components In Financial Models," Working Papers 243, Research Seminar in International Economics, University of Michigan.
- Levinsohn, J. & Mackie-Mason, J., 1989. "A Simple, Consistent Estimator For Disturbance Components In Financial Models," Papers 89-16, Michigan - Center for Research on Economic & Social Theory.
- Levinsohn, J. & Mackie-Mason, J.K., 1989. "A Simple, Consistent Estimator For Disturbance Components In Financial Models," Papers 443, Stockholm - International Economic Studies.
- Steven A. Sharpe, 1999. "Stock prices, expected returns, and inflation," Finance and Economics Discussion Series 1999-02, Board of Governors of the Federal Reserve System (U.S.).
- Reffett, Kevin L., 1995. "Arbitrage pricing and the stochastic inflation tax in a multisector monetary economy," Journal of Economic Dynamics and Control, Elsevier, vol. 19(3), pages 569-597, April.
- Grant McQueen & V. Vance Roley, 1990. "Stock Prices, News, and Business Conditions," NBER Working Papers 3520, National Bureau of Economic Research, Inc.
- John Ammer, 1994. "Inflation, inflation risk, and stock returns," International Finance Discussion Papers 464, Board of Governors of the Federal Reserve System (U.S.).
- Lumpkin, Stephen A. & O'Brien, James M., 1997. "Thrift stock returns and portfolio interest rate sensitivity," Journal of Monetary Economics, Elsevier, vol. 39(2), pages 341-357, July.
- Ross Jennings & Gustavo Maturana, 2005. "The Usefulness Of Chilean Inflation Accounting," Abante, Escuela de Administracion. Pontificia Universidad Católica de Chile., vol. 8(1), pages 85-118.
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