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We test for the long-run relationship between stock prices, inflation and itsuncertainty for different U.S. sector stock indexes, over the period 2002M7 to2015M10. For this purpose we use a cointegration analysis with one structuralbreak to capture the crisis effect, and we assess the inflation uncertaintybased on a time-varying unobserved component model. In line with recentempirical studies we discover that in the long-run, the inflation and itsuncertainty negatively impact the stock prices, opposed to the well-knownFisher effect. In addition we show that for several sector stock indexes thenegative effect of inflation and its uncertainty vanishes after the crisissetup. However, in the short-run the results provide evidence in the favor of anegative impact of uncertainty, while the inflation has no significantinfluence on stock prices, except for the consumption indexes. Theconsideration of business cycle effects confirms our findings, which provesthat the results are robust, both for the long-and the short-run relationships.

Stock prices, inflation and inflation uncertainty in the U.S.: Testing the long-run relationship considering Dow Jones sector indexes