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Price inflation and stock returns

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  • Oxman, Jeffrey
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    Abstract

    This letter demonstrates that price inflation and stock returns display differing relationships depending on the measure of inflation used. The regularity that price inflation and stock returns are negatively related in post-World War II depends on the model specification.

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    File URL: http://www.sciencedirect.com/science/article/pii/S0165176512001541
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    Bibliographic Info

    Article provided by Elsevier in its journal Economics Letters.

    Volume (Year): 116 (2012)
    Issue (Month): 3 ()
    Pages: 385-388

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    Handle: RePEc:eee:ecolet:v:116:y:2012:i:3:p:385-388

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    Web page: http://www.elsevier.com/locate/ecolet

    Related research

    Keywords: Inflation; Equity premium; Dividend yield;

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    References

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    1. John Y. Campbell & Tuomo Vuolteenaho, 2004. "Inflation Illusion and Stock Prices," NBER Working Papers 10263, National Bureau of Economic Research, Inc.
    2. Lee, Bong-Soo, 2003. " Asset Returns and Inflation in Response to Supply, Monetary, and Fiscal Disturbances," Review of Quantitative Finance and Accounting, Springer, vol. 21(3), pages 207-31, November.
    3. Martin Feldstein, 1978. "Inflation and the Stock Market," NBER Working Papers 0276, National Bureau of Economic Research, Inc.
    4. Brandt, Michael W. & Wang, Kevin Q., 2003. "Time-varying risk aversion and unexpected inflation," Journal of Monetary Economics, Elsevier, vol. 50(7), pages 1457-1498, October.
    5. Fama, Eugene F, 1981. "Stock Returns, Real Activity, Inflation, and Money," American Economic Review, American Economic Association, vol. 71(4), pages 545-65, September.
    6. Michael J. Boskin, 1998. "Consumer Prices, the Consumer Price Index, and the Cost of Living," Journal of Economic Perspectives, American Economic Association, vol. 12(1), pages 3-26, Winter.
    7. Boskin, Michael J, et al, 1997. "The CPI Commission: Findings and Recommendations," American Economic Review, American Economic Association, vol. 87(2), pages 78-83, May.
    8. Michael Boskin, 2005. "Causes and Consequences of Bias in the Consumer Price Index as a Measure of the Cost of Living," Atlantic Economic Journal, International Atlantic Economic Society, vol. 33(1), pages 1-13, March.
    9. Geske, Robert & Roll, Richard, 1983. " The Fiscal and Monetary Linkage between Stock Returns and Inflation," Journal of Finance, American Finance Association, vol. 38(1), pages 1-33, March.
    10. Martin Feldstein, 1979. "Inflation, Tax Rules, and the Stock Market," NBER Working Papers 0403, National Bureau of Economic Research, Inc.
    11. Randolph B. Cohen & Christopher Polk & Tuomo Vuolteenaho, 2005. "Money Illusion in the Stock Market: The Modigliani-Cohn Hypothesis," The Quarterly Journal of Economics, MIT Press, vol. 120(2), pages 639-668, May.
    12. Lee, Bong Soo, 2010. "Stock returns and inflation revisited: An evaluation of the inflation illusion hypothesis," Journal of Banking & Finance, Elsevier, vol. 34(6), pages 1257-1273, June.
    13. Hess, Patrick J & Lee, Bong-Soo, 1999. "Stock Returns and Inflation with Supply and Demand Disturbances," Review of Financial Studies, Society for Financial Studies, vol. 12(5), pages 1203-18.
    14. Fama, Eugene F, 1983. "Stock Returns, Real Activity, Inflation, and Money: Reply," American Economic Review, American Economic Association, vol. 73(3), pages 471-72, June.
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    Cited by:
    1. Acker, Daniella & Duck, Nigel W., 2013. "Inflation illusion and the US dividend yield: Some further evidence," Journal of International Money and Finance, Elsevier, vol. 33(C), pages 235-254.

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