International Stock Returns and Expected Inflation: Evidence from Pre-War Data

Florida Atlantic University Working Paper

29 Pages Posted: 27 May 2002

See all articles by James Ross McCown

James Ross McCown

University of Oklahoma - Division of Finance; Toltec Group

Date Written: April 18, 2001

Abstract

This research examines the relations between expected inflation and real returns on stocks for six industrialized countries during the pre-World War II period. Negative correlations are found, consistent with the findings of other researchers for the postwar period.

Fama's (1981) proxy theory attempts to explain the negative relation, based on his finding of a strong positive correlation between real returns and real output growth for the postwar period. This research finds the real return/output growth correlation to be zero for the U.S. and France, and negative for Germany, for the pre-1914 period. (JEL E31, G12, N10, N20)

Keywords: International Asset Pricing, Inflation

JEL Classification: E31, G12, N10, N20

Suggested Citation

McCown, James Ross, International Stock Returns and Expected Inflation: Evidence from Pre-War Data (April 18, 2001). Florida Atlantic University Working Paper, Available at SSRN: https://ssrn.com/abstract=310898 or http://dx.doi.org/10.2139/ssrn.310898

James Ross McCown (Contact Author)

University of Oklahoma - Division of Finance ( email )

Norman, OK 73019
United States

Toltec Group ( email )

Oklahoma City, OK
United States

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