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SSRN Electronic Journal, 2022 The past half-century has seen major shifts in inflation expectations, how inflation comoves with the business cycle, and how stocks comove with Treasury bonds. Against this backdrop, we review the economic channels and empirical evidence on how inflation is priced in financial markets. Not all inflation episodes are created equal.
Anna Cieslak, Carolin Pflueger
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Dynamic Asset Allocation Under Inflation [PDF]
SSRN Electronic Journal, 2000 ABSTRACTWe develop a simple framework for analyzing a finite‐horizon investor's asset allocation problem under inflation when only nominal assets are available. The investor's optimal investment strategy and indirect utility are given in simple closed form.
Brennan, Michael J., Xia, Yihong
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Inflation and the Price of Real Assets [PDF]
, 2009 In the 1970s, U.S. asset markets witnessed (i) a 25% dip in the ratio of aggregate household wealth relative to GDP and (ii) negative comovement of house and stock prices that drove a 20% portfolio shift out of equity into real estate. This study uses an overlapping generations model with uninsurable nominal risk to quantify the role of structural ...
Monika Piazzesi, Martin Schneider
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Firms’ Asset Holdings and Inflation Expectations [PDF]
SSRN Electronic Journal, 2020 Abstract This paper investigates the relationship between firms’ inflation expectations and their holdings of liquid assets. We implement a new quantitative survey of firms’ expectations about inflation in New Zealand. We find that firms that hold more shares of liquid assets systematically report lower inflation expectations.
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Inflation and Asset Prices [PDF]
SSRN Electronic Journal, 2011 Changes in the general level of prices and inflation have profound effects on asset prices. There are several reasons for these effects and the influence differs depending on the source of the inflation and whether it is expected or not. To understand these effects it is important to clarify what is meant by inflation, the pure theory of the sources ...
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Asset Pricing and Expected Inflation [PDF]
The Journal of Finance, 1986 ABSTRACTThis paper provides an equilibrium model in which expected real returns on common stocks are negatively related to expected inflation and money growth. It is shown that the fall in real wealth associated with an increase in expected inflation decreases the real rate of interest and the expected real rate of return of the market portfolio.
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Inflation Risk and International Asset Returns [PDF]
SSRN Electronic Journal, 2006 We show that inflation risk is priced in international asset returns. We analyze inflation risk in a framework that encompasses the International Capital Asset Pricing Model (ICAPM) of Adler and Dumas (1983). In contrast to the extant empirical literature on the ICAPM, we relax the assumption that inflation rates are constant.
Moerman, GA, van Dijk, Mathijs
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Is the FOMC’s Policy Inflating Asset Prices? [PDF]
Economic Synopses, 2011 Keeping the policy rate significantly and persistently below "long-run equilibrium rates" may inflate asset prices.
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Inflation and the Choice of Asset Life [PDF]
, 1978 Given the current corporate tax structure in the U.S., inflation may have an important impact on the production decisions of firms, notably the choice of capital durability. This paper presents a model of competitive behavior in which firms may choose the durability of their capital goods.
Alan Auerbach, Martin Feldstein
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Asset price inflation and monetary policy [PDF]
Atlantic Economic Journal, 2003 It is crucial that central banks and regulatory authorities be aware of effects of asset price inflation on the stability of the financial system. Lending activity based on asset collateral during the boom is hazardous to the health of lenders when the boom collapses.
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