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The stock return-inflation puzzle revisited

By Liam A. Gallagher and Mark P. Taylor

Abstract

We develop a theoretical model to formalize and derive testable implications of Fama's [American Economic Review 71 (1981) 545] 'proxy hypothesis' explanation of the stock return-inflation puzzle. Using a multivariate innovation decomposition, the evidence provides strong confirmation of the proxy hypothesis explanation of the puzzle in the US over the last 40 years. (C) 2002 Elsevier Science B.V. All rights reserved

Topics: HC
Publisher: Elsevier
Year: 2002
DOI identifier: 10.1016/s0165-1765(01)00613-9
OAI identifier: oai:wrap.warwick.ac.uk:11154
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