Inflation and Stock Prices: No Illusion

Chao Wei

Journal of Money, Credit and Banking, 2010, vol. 42, issue 2‐3, 325-345

Abstract: Campbell and Vuolteenaho (2004) use VAR results to advocate inflation illusion as the explanation for the positive association between inflation and dividend yields. Using a structural approach, we find that a fully rational dynamic general equilibrium model can generate a positive correlation between dividend yields and inflation as observed in the data. The paper describes a channel by which the technology shock moves both inflation and dividend yields in the same direction, resulting in a positive correlation between the two.

Date: 2010
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https://doi.org/10.1111/j.1538-4616.2009.00289.x

Related works:
Journal Article: Inflation and Stock Prices: No Illusion (2010)
Working Paper: Inflation and Stock Prices: No Illusion (2007)
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Persistent link: https://EconPapers.repec.org/RePEc:wly:jmoncb:v:42:y:2010:i:2-3:p:325-345

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