Firm characteristics, unanticipated inflation, and stock returns
AbstractThis paper re-examines the effects of nominal contracts on the relationship between unanticipated inflation and individual stock's rate of return. This study differs in three main ways from previous research. First, announced inflation data are used to examine the effects of unanticipated inflation. Second, a different specification is used to obtain more efficient estimates. Third, additional nominal contracts are considered. The empirical results indicate that time-varying firm characteristics related to inflation predominately determine the effect of unanticipated inflation on a stock's rate of return. A firm's debt-equity ratio appears to be particularly important in determining the response.
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Bibliographic InfoPaper provided by Federal Reserve Bank of Kansas City in its series Research Working Paper with number 88-01.
Date of creation: 1988
Date of revision:
Other versions of this item:
- Pearce, Douglas K & Roley, V Vance, 1988. " Firm Characteristics, Unanticipated Inflation, and Stock Returns," Journal of Finance, American Finance Association, vol. 43(4), pages 965-81, September.
- 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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