Inflation and the Stock Market
AbstractThis paper discusses a crucial cause of the failure of share prices to rise during a decade of substantial inflation. Indeed, the share value per dollar of pretax earnings actually fell from 10.82 in 1967 to 6.65 in 1976. The analysis here indicates that this inverse relation between higher inflation and lower share prices during the past decade was not due to chance or to other unrelated economic events. On the contrary, an important adverse effect of increased inflation on share prices results from basic features of the current U.S. tax laws, particularly historic cost depreciation and the taxation of nominal capital gains.
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Bibliographic InfoPaper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 0276.
Date of creation: Aug 1978
Date of revision:
Publication status: published as Martin Feldstein. "Inflation and the Stock Market," in "Inflation, Tax Rules, and Capital Formation" University of Chicago Press (1983)
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Other versions of this item:
- Martin Feldstein, 1983. "Inflation and the Stock Market," NBER Chapters, in: Inflation, Tax Rules, and Capital Formation, pages 186-198 National Bureau of Economic Research, Inc.
- Feldstein, Martin, 1980. "Inflation and the Stock Market," American Economic Review, American Economic Association, vol. 70(5), pages 839-47, December.
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Alan J. Auerbach, 1980.
"Share Valuation and Corporate Equity Policy,"
NBER Working Papers
0255, National Bureau of Economic Research, Inc.
- Bradford, David F., 1981.
"The incidence and allocation effects of a tax on corporate distributions,"
Journal of Public Economics,
Elsevier, vol. 15(1), pages 1-22, February.
- David F. Bradford, 1979. "The Incidence and Allocation Effects of a Tax on Corporate Distributions," NBER Working Papers 0349, National Bureau of Economic Research, Inc.
- Van Horne, James C & Glassmire, William F, Jr, 1972. "The Impact of Unanticipated Changes in Inflation on the Value of Common Stocks," Journal of Finance, American Finance Association, vol. 27(5), pages 1081-92, December.
- Hong, Hai, 1977. "Inflation and the Market Value of the Firm: Theory and Tests," Journal of Finance, American Finance Association, vol. 32(4), pages 1031-48, September.
- Motley, Brian, 1969. "Inflation and Common Stock Values: Comment," Journal of Finance, American Finance Association, vol. 24(3), pages 530-35, June.
- 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.
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