Stock returns, inflation, and the ‘proxy hypothesis’: A new look at the data
This paper reexamines the proxy hypothesis of Fama ( American Economic Review, 1981, 71, 545–565) as the main explanation for the negative correlation between stock returns and inflation. We look at quarterly data on industrial-production growth, monetary-base growth, CPI inflation, three-month Trea...
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| Veröffentlicht in: | Economics letters 1995-04, Vol.48 (1), p.47-53 |
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| container_title | Economics letters |
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| creator | Balduzzi, Pierluigi |
| description | This paper reexamines the proxy hypothesis of Fama (
American Economic Review, 1981, 71, 545–565) as the main explanation for the negative correlation between stock returns and inflation. We look at quarterly data on industrial-production growth, monetary-base growth, CPI inflation, three-month Treasury-bill rates, and returns on the equally-weighted NYSE portfolio, for the 1954–1976 and 1977–1990 periods. Using time-series techniques, we find that production growth induces only a weak negative correlation between inflation and stock returns, and explains less of the covariance between the two series than inflation and interest-rate innovations. |
| doi_str_mv | 10.1016/0165-1765(94)00568-M |
| format | Article |
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| fulltext | fulltext |
| identifier | ISSN: 0165-1765 |
| ispartof | Economics letters, 1995-04, Vol.48 (1), p.47-53 |
| issn | 0165-1765 1873-7374 |
| language | eng |
| recordid | cdi_proquest_miscellaneous_38748316 |
| source | RePEc; Elsevier ScienceDirect Journals; Periodicals Index Online |
| subjects | Covariance Covariance decomposition Inflation Stock returns Vector autoregression Vector moving average |
| title | Stock returns, inflation, and the ‘proxy hypothesis’: A new look at the data |
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