Answers are grounded in this paper and cite their sources.
The proxy hypothesis states that the negative relationship between inflation and stock returns is spurious and really only proxies for the positive relationship between stock returns and real variables. Previous testes of the proxy hypothesis have used actual values instead of forecasted values for the real activity variable. Using only forecasted variables, our results do not support the proxy hypothesis.
No takes yet. Share an insight, caveat, or question.
McCarthy et al. (1990) studied this question.
Synapse has enriched 10 related papers. Consider them for comparative context: