A Reexamination Of The Proxy Hypothesis
Stock Returns; Inflation; Business, Finance
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.
Journal of Financial Research
Liu, Y. A.; Hsueh, L. P.; and Clayton, R. J., "A Reexamination Of The Proxy Hypothesis" (1993). Faculty Bibliography. 1885.