Stock returns under hyperinflation: Evidence from China 1945–48

Liuyan Zhao

China Economic Review, 2017, vol. 45, issue C, 155-167

Abstract: This paper presents new evidence for the Fisher hypothesis, which states a positive relationship between nominal stock returns and inflation. We introduce a new data set from the episode of hyperinflation that occurred in China after World War II. To establish the reliability of our estimates we consider different frequencies, and time horizons and econometric models. The results reveal that stocks were a complete hedge against expected inflation and a partial hedge against unexpected inflation. In contrast to the empirical literature on the ‘stock return-inflation puzzle’, we find that the Fisher hypothesis is applicable to common stocks even with a short-horizon in the Chinese hyperinflation context.

Keywords: Stock return; Hyperinflation; The Fisher hypothesis (search for similar items in EconPapers)
JEL-codes: C32 E31 N15 (search for similar items in EconPapers)
Date: 2017
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Citations: View citations in EconPapers (5)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:chieco:v:45:y:2017:i:c:p:155-167

DOI: 10.1016/j.chieco.2017.07.003

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