Factors affecting asset price expectations: fundamentals and policy variables
AbstractThis paper examines what factors move US and European stock and bond markets, extending earlier work by Campbell and Ammer (1993). Inflation news is incorporated into the stock and bond decomposition and explicit attention is given to different horizons over which expectations are formed. Sensitivities to monetary policy instruments and fundamental factors are examined. The data are monthly. For the euro area, a unique data set is constructed. The results illuminate a number of widely-held preconceptions and confirm that inflation news volatility is a non-trivial factor in the stock and bond return decompositions.
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Bibliographic InfoPaper provided by Bank of Finland in its series Research Discussion Papers with number 13/2001.
Length: 47 pages
Date of creation: 08 Aug 2001
Date of revision:
stock prices; bond prices; return decompositions; fundamental factors;
Find related papers by JEL classification:
- E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
- G12 - Financial Economics - - General Financial Markets - - - Asset Pricing
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- N. Valckx, 2001. "Stock and Bond Market Sensitivities to Monetary Variables," WO Research Memoranda (discontinued) 680, Netherlands Central Bank, Research Department.
- Saarenheimo, Tuomas, 2001. "Should unemployment benefits decrease as the unemployment spell lengthens?," Research Discussion Papers 23/2001, Bank of Finland.
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