Stock returns and inflation expectations: Evidence from 20 major countries
We examine the relation between stock market returns and inflation expectations using data for 20 advanced countries. Evidence reveals that a negative relation presents in each of 18 countries; the exceptions are Brazil and Russia. The uncertainty hypothesis is established via evidence that U.S. inf...
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| Format: | Article |
| Language: | English |
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AIMS Press
2023-10-01
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| Series: | Quantitative Finance and Economics |
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| Online Access: | https://www.aimspress.com/article/doi/10.3934/QFE.2023027?viewType=HTML |
| _version_ | 1797367596041895936 |
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| author | Thomas C. Chiang |
| author_facet | Thomas C. Chiang |
| author_sort | Thomas C. Chiang |
| collection | DOAJ |
| description | We examine the relation between stock market returns and inflation expectations using data for 20 advanced countries. Evidence reveals that a negative relation presents in each of 18 countries; the exceptions are Brazil and Russia. The uncertainty hypothesis is established via evidence that U.S. inflation positively increases equity market volatility (EMV), which has a negative impact on U.S. and global stock returns. Evidence leads to the conclusion that both expected domestic inflation and EMV have adverse impacts on stock returns. The model is robust with different formations of inflation expectations and whether the test equations are examined using nominal or real stock returns. |
| first_indexed | 2024-03-08T17:20:37Z |
| format | Article |
| id | doaj.art-3ce76ba1a8cf4da09691d95479ec26e8 |
| institution | Directory Open Access Journal |
| issn | 2573-0134 |
| language | English |
| last_indexed | 2024-03-08T17:20:37Z |
| publishDate | 2023-10-01 |
| publisher | AIMS Press |
| record_format | Article |
| series | Quantitative Finance and Economics |
| spelling | doaj.art-3ce76ba1a8cf4da09691d95479ec26e82024-01-03T05:49:30ZengAIMS PressQuantitative Finance and Economics2573-01342023-10-017453856810.3934/QFE.2023027Stock returns and inflation expectations: Evidence from 20 major countriesThomas C. Chiang 0Department of Finance, Drexel University, LeBow Hall, 3220 Market Street, Philadelphia, PA, 19104, USAWe examine the relation between stock market returns and inflation expectations using data for 20 advanced countries. Evidence reveals that a negative relation presents in each of 18 countries; the exceptions are Brazil and Russia. The uncertainty hypothesis is established via evidence that U.S. inflation positively increases equity market volatility (EMV), which has a negative impact on U.S. and global stock returns. Evidence leads to the conclusion that both expected domestic inflation and EMV have adverse impacts on stock returns. The model is robust with different formations of inflation expectations and whether the test equations are examined using nominal or real stock returns.https://www.aimspress.com/article/doi/10.3934/QFE.2023027?viewType=HTMLfama proxy effectgeske-roll hypothesisuncertainty hypothesisreal stock market returnsinflation expectationsmonetary policy uncertainty |
| spellingShingle | Thomas C. Chiang Stock returns and inflation expectations: Evidence from 20 major countries Quantitative Finance and Economics fama proxy effect geske-roll hypothesis uncertainty hypothesis real stock market returns inflation expectations monetary policy uncertainty |
| title | Stock returns and inflation expectations: Evidence from 20 major countries |
| title_full | Stock returns and inflation expectations: Evidence from 20 major countries |
| title_fullStr | Stock returns and inflation expectations: Evidence from 20 major countries |
| title_full_unstemmed | Stock returns and inflation expectations: Evidence from 20 major countries |
| title_short | Stock returns and inflation expectations: Evidence from 20 major countries |
| title_sort | stock returns and inflation expectations evidence from 20 major countries |
| topic | fama proxy effect geske-roll hypothesis uncertainty hypothesis real stock market returns inflation expectations monetary policy uncertainty |
| url | https://www.aimspress.com/article/doi/10.3934/QFE.2023027?viewType=HTML |
| work_keys_str_mv | AT thomascchiang stockreturnsandinflationexpectationsevidencefrom20majorcountries |