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STOCK RETURNS, INFLATION, AND REAL OUTPUT
Author(s) -
COATE DOUGLAS,
VANDERHOFF JAMES
Publication year - 1986
Publication title -
economic inquiry
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.823
H-Index - 72
eISSN - 1465-7295
pISSN - 0095-2583
DOI - 10.1111/j.1465-7295.1986.tb01833.x
Subject(s) - spurious relationship , economics , stock (firearms) , econometrics , inflation (cosmology) , real interest rate , monetary economics , monetary policy , mathematics , statistics , mechanical engineering , physics , theoretical physics , engineering
This paper provides empirical evidence on the extent to which the inverse relationship between real stock returns and inflation in recent years is causal or spurious. The results indicate that this relationship is spurious and can be explained by the inverse correlation between unexpected inflation and unexpected real output. The expected and unexpected real output and inflation variables are generated from the ASA/NBER Business Outlook Surveys.