Title of article
Inflationandthestockmarket:Understandingthe‘‘FedModel’’$
Author/Authors
Geert Bekaert، نويسنده ,
Issue Information
روزنامه با شماره پیاپی سال 2010
Pages
17
From page
278
To page
294
Abstract
The so-calledFedmodelpostulatesthatthedividendorearningsyieldonstocksshould
equaltheyieldonnominalTreasurybonds,oratleastthatthetwoshouldbehighly
correlated.InUSdatathereisindeedastrikinglyhightimeseriescorrelationbetweenthe
yieldonnominalbondsandthedividendyieldonequities.Thispositivecorrelationisoften
attributedtothefactthatbothbondandequityyieldscomovestronglyandpositivelywith
expectedinflation.Contrarytosomeoftheextantliterature,weshowthatthiseffectis
consistentwithmodernassetpricingtheory incorporating uncertaintyaboutrealgrowth
prospects andhabit-basedriskaversion.IntheUS,highexpectedinflationhastendedto
coincidewithperiodsofheighteneduncertaintyaboutrealeconomicgrowthandunusually
highriskaversion,bothofwhichrationallyraiseequityyields.
Keywords
Money illusionEquity premiumCountercyclical riskaversionFed modelInflationEconomic uncertaintyDividend yieldStock–bond correlationBond yield
Journal title
Journal of Monetary Economics
Serial Year
2010
Journal title
Journal of Monetary Economics
Record number
846391
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