Stock Prices and Bond Yields: Can Their Co-Movements Be Explained in Terms of Present Value Models?

Robert Shiller and Andrea E. Beltratti
Additional contact information
Andrea E. Beltratti: University of Turin

No 953, Cowles Foundation Discussion Papers from Cowles Foundation for Research in Economics, Yale University

Abstract: Real stock prices seem to overreact to changes in long-term interest rates. That is, real stock prices drop when long-term interest rates rise (and rise when they fall) more than would be implied by a rational expectationspresent value model where expectations are based on a vector autoregression. This overreaction is not associated with any overreaction to changes in the short-run inflation rate. Over the last century real stock prices have shown little reaction to changes in inflation rates, and according to the model they should show little reaction. These conclusions were reached from an analysis of annual data in the United States 1871 to 1989 and the United Kingdom 1918 to 1989.

Pages: 33 pages
Date: 1990-09
Note: CFP 833.
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

Published in Journal of Monetary Economics (1992), 30: 25-46

Downloads: (external link)
https://cowles.yale.edu/sites/default/files/files/pub/d09/d0953.pdf (application/pdf)
Our link check indicates that this URL is bad, the error code is: 404 Not Found

Related works:
Journal Article: Stock prices and bond yields: Can their comovements be explained in terms of present value models? (1992)
Working Paper: Stock Prices and Bond Yields: Can Their Comovements Be Explained in Terms of Present Value Models? (1990)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:cwl:cwldpp:953

Ordering information: This working paper can be ordered from
Cowles Foundation, Yale University, Box 208281, New Haven, CT 06520-8281 USA
The price is None.

Access Statistics for this paper

More papers in Cowles Foundation Discussion Papers from Cowles Foundation for Research in Economics, Yale University Yale University, Box 208281, New Haven, CT 06520-8281 USA. Contact information at EDIRC.
Bibliographic data for series maintained by Brittany Ladd ().