Premium
A RE‐EXAMINATION OF THE PROXY HYPOTHESIS
Author(s) -
Liu Y. Angela,
Hsueh L. Paul,
Clayton Ronnie J.
Publication year - 1993
Publication title -
journal of financial research
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.319
H-Index - 49
eISSN - 1475-6803
pISSN - 0270-2592
DOI - 10.1111/j.1475-6803.1993.tb00145.x
Subject(s) - proxy (statistics) , econometrics , economics , statistical hypothesis testing , stock (firearms) , statistics , mathematics , geography , archaeology
In this study we examine whether the proxy hypothesis can explain the puzzling negative relation between real stock returns and expected inflation. Our study improves upon previous tests that suffer from model misspecification and are incomplete. With correctly specified models, we provide a comprehensive test using data from four major industrialized nations during the period of floating exchange rates. Results do not support the proxy hypothesis.