The Fisher effect is the one-to-one relation between expected nominal interest and
expected inflation. Recently, Boudoukh, Richardson, and Whitelaw show that cross-sectional
variation in the negative inflation-stock return relation depends on cyclical nature of industries.
This study takes an new approach to examine cross-sectional variation in the negative inflationreturn
relation based on stock and bond characteristics, especially, for Korean securities. This
study shows that the cross sectional variation in the sensitivity of security returns to inflation can
be also explained by bond and stock market factors for Korean securities.
