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Testing Fisher hypothesis in long horizons for G7 and eight Asian countries.1

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  • Ka-Fu Wong
  • Hai-Jun Wu
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    Abstract

    Using monthly data from G7 and eight Asian countries, support is found for the Fisher hypothesis, as well as a positive relation between long-horizon nominal stock returns and expected inflation but not between long-horizon nominal stock returns and contemporaneous inflation. These empirical results complement and strengthen those of Boudoukh and Richardson. 1 The MATLAB program and data to compute the results in this paper are available from http://kafuwong.econ.hku.hk/research/fisher/.

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    File URL: http://www.informaworld.com/openurl?genre=article&doi=10.1080/1350485032000158645&magic=repec&7C&7C8674ECAB8BB840C6AD35DC6213A474B5
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    Bibliographic Info

    Article provided by Taylor and Francis Journals in its journal Applied Economics Letters.

    Volume (Year): 10 (2003)
    Issue (Month): 14 ()
    Pages: 917-923

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    Handle: RePEc:taf:apeclt:v:10:y:2003:i:14:p:917-923

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    1. Nelson, Charles R, 1976. "Inflation and Rates of Return on Common Stocks," Journal of Finance, American Finance Association, vol. 31(2), pages 471-83, May.
    2. Martin D.D. Evans & Karen K. Lewis, 1993. "Do Expected Shifts in Inflation Affect Estimates of the Long-Run Fisher Relation?," Working Papers 93-06, New York University, Leonard N. Stern School of Business, Department of Economics.
    3. Pesaran, M Hashem & Smith, Richard J, 1994. "A Generalized R[superscript]2 Criterion for Regression Models Estimated by the Instrumental Variables Method," Econometrica, Econometric Society, vol. 62(3), pages 705-10, May.
    4. Koustas, Z., Serletis, A., 1998. "On the Fisher Effect," Papers 98-09, Calgary - Department of Economics.
    5. Arusha Cooray, 2002. "The Fisher Effect: A Review of the Literature," Research Papers 0206, Macquarie University, Department of Economics.
    6. Berument, Hakan, 1999. "The Impact of Inflation Uncertainty on Interest Rates in the UK," Scottish Journal of Political Economy, Scottish Economic Society, vol. 46(2), pages 207-18, May.
    7. Darby, Michael R, 1975. "The Financial and Tax Effects of Monetary Policy on Interest Rates," Economic Inquiry, Western Economic Association International, vol. 13(2), pages 266-76, June.
    8. Whitney K. Newey & Kenneth D. West, 1986. "A Simple, Positive Semi-Definite, Heteroskedasticity and AutocorrelationConsistent Covariance Matrix," NBER Technical Working Papers 0055, National Bureau of Economic Research, Inc.
    9. Fama, Eugene F, 1975. "Short-Term Interest Rates as Predictors of Inflation," American Economic Review, American Economic Association, vol. 65(3), pages 269-82, June.
    10. Fama, Eugene F. & Schwert, G. William, 1977. "Asset returns and inflation," Journal of Financial Economics, Elsevier, vol. 5(2), pages 115-146, November.
    11. Bodie, Zvi, 1976. "Common Stocks as a Hedge against Inflation," Journal of Finance, American Finance Association, vol. 31(2), pages 459-70, May.
    12. Boudoukh, Jacob & Richardson, Matthew, 1993. "Stock Returns and Inflation: A Long-Horizon Perspective," American Economic Review, American Economic Association, vol. 83(5), pages 1346-55, December.
    13. William J. Crowder & Mark E. Wohar, 1999. "Are Tax Effects Important in the Long-Run Fisher Relationship? Evidence from the Municipal Bond Market," Journal of Finance, American Finance Association, vol. 54(1), pages 307-317, 02.
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