Stock Returns, the Interest Rate and Inflation in the Italian Stock Market: A Long-Run Perspective

Fabio Bagliano and Andrea Beltratti

Giornale degli Economisti, 1997, vol. 56, issue 3-4, 139-167

Abstract: This paper investigates the behaviour of stock prices in Italy over the 1963-1995 period. By means of a time-series analysis of both the long- and the short-run properties of stock prices and other macroeconomic variables, we find strong evidence of a long-run equilibrium negative relation between the inflation rate and a real stock price index. The Dynamic adjustment of stock prices towards the equilibrium relation is also analysed.

Keywords: stock returns; interest rate; inflation; cointegration; structural VAR (search for similar items in EconPapers)
JEL-codes: C32 E44 G10 (search for similar items in EconPapers)
Date: 1997
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