Stock prices, inflation and inflation uncertainty in the U.S.: testing the long-run relationship considering Dow Jones sector indexes

Claudiu Albulescu, Christian Aubin and Daniel Goyeau
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Christian Aubin: Axe 2 (2011-2016) : « Marchés, Cultures de consommation, Autonomie et Migrations » (MSHS Poitiers) - MSHS de Poitiers - Maison des sciences de l'homme et de la société de Poitiers - UP - Université de Poitiers = University of Poitiers - CNRS - Centre National de la Recherche Scientifique, CRIEF [Poitiers] - Centre de recherche sur l'intégration économique et financière - UP - Université de Poitiers = University of Poitiers, CPER INSECT - CPER "INnovation Sociale, Economique et Culturelle dans des Territoires en mutation" (MSHS Poitiers) - MSHS de Poitiers - Maison des sciences de l'homme et de la société de Poitiers [UAR 3565] - UP - Université de Poitiers = University of Poitiers - CNRS - Centre National de la Recherche Scientifique
Daniel Goyeau: CRIEF [Poitiers] - Centre de recherche sur l'intégration économique et financière - UP - Université de Poitiers = University of Poitiers, Axe 2 (2011-2016) : « Marchés, Cultures de consommation, Autonomie et Migrations » (MSHS Poitiers) - MSHS de Poitiers - Maison des sciences de l'homme et de la société de Poitiers - UP - Université de Poitiers = University of Poitiers - CNRS - Centre National de la Recherche Scientifique

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Abstract: We test for the long-run relationship between stock prices, inflation and its uncertainty for different U.S. sector stock indexes, over the recent time-span, namely 2006M1-2015M5. For this purpose we use a cointegration analysis with one structural break to capture the crisis effect, and two alternative measures of inflation uncertainty relying on a time-varying unobserved component model. In line with recent empirical studies we discover that in the long-run, the inflation and its uncertainty negatively impact the stock prices, opposed to the well-known Fisher effect. However, in the short-run the results are mixed, providing evidence for complex interdependences between stock prices, inflation and its uncertainty. Our results are robust regarding the use of a bounded or unbounded inflation trend for measuring the uncertainty, and a slight difference is noticed between different sector indexes.

Keywords: inflation uncertainty; cointegration with structural breaks; stock prices (search for similar items in EconPapers)
Date: 2016-07-07
New Economics Papers: this item is included in nep-mac
Note: View the original document on HAL open archive server: https://shs.hal.science/halshs-01394897
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Published in 33RD GdRE Annual International Symposium on Money, Banking and Finance, Centre d'Etudes et de Recherche sur le Développement international (CERDI), Jul 2016, Clermont-Ferrand, France. pp.1 - 14, ⟨10.1080/00036846.2016.1226491⟩

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Journal Article: Stock prices, inflation and inflation uncertainty in the U.S.: testing the long-run relationship considering Dow Jones sector indexes (2017)
Working Paper: Stock prices, inflation and inflation uncertainty in the U.S.: Testing the long-run relationship considering Dow Jones sector indexes (2016)
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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:halshs-01394897

DOI: 10.1080/00036846.2016.1226491

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