Answers are grounded in this paper and cite their sources.
In this study we examine whether the proxy hypothesis can explain the puzzling negative relation between real stock returns and expected inflation. Our study improves upon previous tests that suffer from model misspecification and are incomplete. With correctly specified models, we provide a comprehensive test using data from four major industrialized nations during the period of floating exchange rates. Results do not support the proxy hypothesis.
No takes yet. Share an insight, caveat, or question.
Liu et al. (1993) studied this question.
Synapse has enriched 10 related papers. Consider them for comparative context: