We examine whether the observed negative relations between stock returns and inflation and between housing returns and inflation can be explained by the inflation illusion hypothesis. We identify the mispricing component in asset prices (i.e., stock prices and housing prices) based on present value models, linear and loglinear models, and we then investigate whether inflation can explain the mispricing component using the data from three countries (the U.S., the U.K., and Korea). When we take into account the potential asymmetric effect of positive and negative inflation on the mispricing components in asset prices, which is an important implication of the inflation illusion hypothesis, we find little evidence for the inflation illusion hypothesis in that both positive and negative inflation rates do not have a negative effect on the mispricing components. Instead, we find that behavioral factors such as consumer sentiments contribute to the mispricing of asset prices.
Keywords: Stock returns; Housing returns; Inflation illusion; Mispricing; Consumer sentiment
JEL classifications: G12; R2; E44; C32
학회소식
[2013년 제 4차] Is mispricing in asset prices due to the inflation
작성자 : 관리자
조회수 : 954
게시일 :
2013-12-16
