Inflation and the stock market: Understanding the Fed Model

• 成果类型: Article
• 署名作者: Bekaert, Geert; Engstrom, Eric
• 署名单位: Columbia University; National Bureau of Economic Research
• 刊物名称: JOURNAL OF MONETARY ECONOMICS
• ISSN/ISSBN: 0304-3932
• DOI: 10.1016/j.jmoneco.2010.02.004
• 发表日期: 2010
• 页码: 278-294
• 关键词: Money illusion; equity premium; Countercyclical risk aversion; Fed model; inflation; Economic uncertainty; Dividend yield; Stock-bond correlation; Bond yield

摘要

The so-called Fed model postulates that the dividend or earnings yield on stocks should equal the yield on nominal Treasury bonds, or at least that the two should be highly correlated. In US data there is indeed a strikingly high time series correlation between the yield on nominal bonds and the dividend yield on equities. This positive correlation is often attributed to the fact that both bond and equity yields comove strongly and positively with expected inflation. Contrary to some of the extant literature, we show that this effect is consistent with modern asset pricing theory incorporating uncertainty about real growth prospects and habit-based risk aversion. In the US, high expected inflation has tended to coincide with periods of heightened uncertainty about real economic growth and unusually high risk aversion, both of which rationally raise equity yields. (C) 2010 Elsevier B.V. All rights reserved.