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Generalized Fama proxy hypothesis: Impact of shocks on Phillips curve and relation of stock returns with inflation

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  • Kryzanowski, Lawrence
  • Rahman, Abdul H.

Abstract

A generalized version of Fama's proxy hypothesis identifies a downward bias in Phillips curve estimations. The (spurious) negative relation between real stock returns and inflation emerges if output rate fluctuations dominate cyclical component fluctuations of a Lucas-type Phillips curve.

Suggested Citation

  • Kryzanowski, Lawrence & Rahman, Abdul H., 2009. "Generalized Fama proxy hypothesis: Impact of shocks on Phillips curve and relation of stock returns with inflation," Economics Letters, Elsevier, vol. 103(3), pages 135-137, June.
    • Handle: RePEc:eee:ecolet:v:103:y:2009:i:3:p:135-137
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    References listed on IDEAS

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    2. Somayeh Madadpour & Mohsen Asgari, 2019. "The puzzling relationship between stocks return and inflation: a review article," International Review of Economics, Springer;Happiness Economics and Interpersonal Relations (HEIRS), vol. 66(2), pages 115-145, June.

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