Resource title

Expected inflation, expected stock returns, and money illusion: what can we learn from survey expectations?

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Resource description

We show empirically that survey-based measures of expected inflation are significant and strong predictors of future aggregate stock returns in several industrialized countries both in-sample and out-of-sample. By empirically discriminating between competing sources of this return predictability by virtue of a comprehensive set of expectations data, we find that money illusion seems to be the driving force behind our results. Another popular hypothesis - inflation as a proxy for aggregate risk aversion - is not supported by the data.

Resource author

Maik Schmeling, Andreas Schrimpf

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Resource publish date

Resource language

eng

Resource content type

text/html

Resource resource URL

http://hdl.handle.net/10419/25278

Resource license

Adapt according to the presented license agreement and reference the original author.