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A RE‐EXAMINATION OF THE PROXY HYPOTHESIS

1993; Wiley; Volume: 16; Issue: 3 Linguagem: Inglês

10.1111/j.1475-6803.1993.tb00145.x

1475-6803

Y. Angela Liu, L. Paul Hsueh, Ronnie Clayton,

Market Dynamics and Volatility

Abstract 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.