Capital Gains, Dividend Yields, and Expected Inflation
Author | : Eugene A. Pilotte |
Publisher | : |
Total Pages | : |
Release | : 2003 |
ISBN-10 | : OCLC:1291251747 |
ISBN-13 | : |
Rating | : 4/5 (47 Downloads) |
Download or read book Capital Gains, Dividend Yields, and Expected Inflation written by Eugene A. Pilotte and published by . This book was released on 2003 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: One explanation for the negative relationship between short-horizon stock returns and inflation is that inflation proxies (inversely) for expected future real output. In this paper, I examine the possibility that inflation also proxies for variation in real price/dividend ratios (excess returns). I show that when the covariance between real price/dividend ratios and inflation is nonzero, the relationship between returns and expected inflation differs for the two components of returns: dividend yields and capital gains returns. My empirical evidence demonstrates that dividend yields and capital gains are related differently to expected inflation in U.S. and foreign markets.