Publicação
Time-varying inflation risk and stock returns
| Resumo: | We show that inflation risk is priced in stock returns and that inflation risk premia in the cross-section and the aggregate market vary over time, even changing sign as in the early 2000s. This time variation is due to both price and quantities of inflation risk changing over time. Using a consumption-based asset pricing model, we argue that inflation risk is priced because inflation predicts real consumption growth. The historical changes in this predictability and in stocks’ inflation betas can account for the size, variability, predictability, and sign reversals in inflation risk premia. |
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| Autores principais: | Boons, Martijn |
| Outros Autores: | Duarte, Fernando; de Roon, Frans; Szymanowska, Marta |
| Assunto: | Cross-sectional asset-pricing Individual stock returns Inflation Inflation hedging Nominal-real covariance Time-varying inflation risk premium Accounting Finance Economics and Econometrics Strategy and Management |
| Ano: | 2020 |
| País: | Portugal |
| Tipo de documento: | artigo |
| Tipo de acesso: | acesso aberto |
| Instituição associada: | Universidade Nova de Lisboa |
| Idioma: | inglês |
| Origem: | Repositório Institucional da UNL |
| Resumo: | We show that inflation risk is priced in stock returns and that inflation risk premia in the cross-section and the aggregate market vary over time, even changing sign as in the early 2000s. This time variation is due to both price and quantities of inflation risk changing over time. Using a consumption-based asset pricing model, we argue that inflation risk is priced because inflation predicts real consumption growth. The historical changes in this predictability and in stocks’ inflation betas can account for the size, variability, predictability, and sign reversals in inflation risk premia. |
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