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Risk and Inflation

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  • Chang, Eric C.
  • Pinegar, J. Michael

Abstract

This paper examines the effect of risk differences on the oft-documented negative relationship between stock returns and inflation. We find risk-related patterns of coefficients on our estimates of the level and change in expected inflation and on unexpected inflation. These patterns are consistent with the hypothesis developed in Fama [2] and in Geske and Roll [7] that future real output growth simultaneously helps to determine current stock returns and various measures of inflation.

Suggested Citation

  • Chang, Eric C. & Pinegar, J. Michael, 1987. "Risk and Inflation," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 22(1), pages 89-99, March.
  • Handle: RePEc:cup:jfinqa:v:22:y:1987:i:01:p:89-99_01
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    Cited by:

    1. Robert Faff & Richard Heaney, 1999. "An examination of the relationship between Australian industry equity returns and expected inflation," Applied Economics, Taylor & Francis Journals, vol. 31(8), pages 915-933.
    2. Sellin, Peter, 1998. "Monetary Policy and the Stock Market: Theory and Empirical Evidence," Working Paper Series 72, Sveriges Riksbank (Central Bank of Sweden).
    3. Ely, David P. & Robinson, Kenneth J., 1997. "Are stocks a hedge against inflation? International evidence using a long-run approach," Journal of International Money and Finance, Elsevier, vol. 16(1), pages 141-167, February.
    4. Peter Sellin, 2001. "Monetary Policy and the Stock Market: Theory and Empirical Evidence," Journal of Economic Surveys, Wiley Blackwell, vol. 15(4), pages 491-541, September.
    5. Jakob Madsen, 2007. "Pitfalls in estimates of the relationship between stock returns and inflation," Empirical Economics, Springer, vol. 33(1), pages 1-21, July.
    6. Piotr Wdowinski, 2004. "Determinants of Country Beta Risk in Poland," CESifo Working Paper Series 1120, CESifo.
    7. Theophano Patra & Sunil Poshakwale, 2006. "Economic variables and stock market returns: evidence from the Athens stock exchange," Applied Financial Economics, Taylor & Francis Journals, vol. 16(13), pages 993-1005.

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