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 National Bureau of Economic Research, Inc in its series NBER Working Papers with number 2366.
Date of creation: Aug 1987
Date of revision:
Publication status: published as The Journal of Finance, Vol. XLIII, No. 4, (September 1988).
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Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.
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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.
- V. Vance Roley & Douglas K. Pearce, 1988. "Firm characteristics, unanticipated inflation, and stock returns," Research Working Paper 88-01, Federal Reserve Bank of Kansas City.
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