The stock return-inflation puzzle and the asymmetric causality in stock returns, inflation and real activity

Jeong-Ryeol Kim

No 2003,03, Discussion Paper Series 1: Economic Studies from Deutsche Bundesbank

Abstract: In this paper, we use a modified concept of Granger-(non)causality in reconsidering the negative correlation between stock returns and inflation known in the literature as stock return-inflation puzzle. Based on the quarterly data for Germany including stock returns, inflation rates and growth rates of gross domestic production, it turns out that the proxy causality between stock returns and inflation may be regarded as an asymmetric one, and the indicative role of stock returns may be also asymmetrically Granger-causal to the growth rates of gross domestic production.

Keywords: Proxy hypothesis; Granger-causality; asymmetry; threshold; nonlinearity (search for similar items in EconPapers)
JEL-codes: C12 E44 (search for similar items in EconPapers)
Date: 2003
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Citations: View citations in EconPapers (21)

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Persistent link: https://EconPapers.repec.org/RePEc:zbw:bubdp1:4198

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