Asset Returns and Inflation
Eugene F. Fama
University of Chicago, Chicago, IL 60637
G. William Schwert
University of Rochester, Rochester, NY 14627
and National Bureau of Economic Research
Journal of Financial Economics, 5 (November 1977) 115-146
JFE All Star
We estimate the extent to which various assets were hedges against the expected and unexpected components of the inflation rate during the 1953-71 period. We find that U. S. government bonds and bills were a complete hedge against expected inflation, and private residential real estate was acomplete hedge against both expected and unexpected inflation. Labor income showed little short-term relationship with either expected or unexpected inflation. The most anomalous result is that common stock returns were negatively related to the expected component of the inflation rate, and probably also to the unexpected component.
Key words: Inflation, interest rates, stock returns
JEL Classifications: G12, G14, E31
Cited 694 times in the SSCI and SCOPUS through 2014
© Copyright 1977, Elsevier
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