Hostname: page-component-78c5997874-g7gxr Total loading time: 0 Render date: 2024-11-15T14:24:05.415Z Has data issue: false hasContentIssue false
  • English
  • Français

Inflation and the Holding Period Returns on Bonds

Published online by Cambridge University Press:  06 April 2009

Jeffrey F. Jaffe  and
Gershon Mandelker
Get access Rights & Permissions [Opens in a new window]

Extract

The relationship between the rate of inflation and the interest rate has been a topic of research for quite some time. A breakthrough in the analysis occurred years ago with Irving Fisher's hypothesis that the nominal interest rate fully reflects the available information concerning the possible future values of the rate of inflation. Others have extended Fisher's original insight to explain further the interaction between the rate of interest and inflation. For example, Mundell [26] uses the Pigou real-balance effect to hypothesize that the real rate of interest is inversely related to the rate of inflation.

Type
Research Article
Information
Journal of Financial and Quantitative Analysis , Volume 14 , Issue 5 , December 1979 , pp. 959 - 979
Copyright
Copyright © School of Business Administration, University of Washington 1979

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

References

REFERENCES

[1]Alchian, A., and Kessel, R. A.. “The Meaning and Validity of the Inflation Induced Lag of Wages behind Prices.” American Economic Review, Vol. 50 (03 1960), pp. 43–66.Google Scholar
[2]Ball, R. J.Inflation and the Theory of Money. London: George Allen & Unwin, Ltd. (1964).Google Scholar
[3]Bildersee, J. S. “Some New Bond Indexes.” Working Paper 7–73, Rodney L. White Center for Financial Research, University of Pennsylvania. (1973).Google Scholar
[4]Bildersee, J. S. “Some New Bond Indexes: Extended and Expanded Results.” Working Paper 2–74, Rodney L. White Center for Financial Research. (1974)Google Scholar
[5]Body, Z. “Common Stocks as a Hedge Against Inflation.” Journal of Finance (05 1976).CrossRefGoogle Scholar
[6]Fama, E. F. “Tomorrow on the New York Stock Exchange.” Journal of Business (07 1965).Google Scholar
[7]Fama, E. F. “Efficient Captial Markets: A Review of Theory and Empirical Work.” Journal of Finance, Vol. 25 (05 1970), pp. 383–417.CrossRefGoogle Scholar
[8]Fama, E. F. “Short-Term Interest Rates as Predictors of Inflation.” American Economic Review (06 1975), pp. 269–282.Google Scholar
[9]Fama, E. F. “Inflation Uncertainty and Expected Returns on Treasury Bills.” Working paper 75–39. European Institute for Advanced Studies in Management, Brussels (09 1975).Google Scholar
[10]Fama, E. F. “Forward Rates as Predictors of Future Spot Rates.” Journal of Financial Economies (10 1976), pp. 361–378.CrossRefGoogle Scholar
[10a]Fama, E. F. and Schwert, G. W., “Asset Returns and Inflation.” Journal of Financial Economics (11 1977).CrossRefGoogle Scholar
[11]Feldstein, M. S., and Eckstein, O.. “The Fundamental Determinants of the Interest Rate.” Review of Economics and Statistics, Vol. 52 (11 1970), pp. 363–376.Google Scholar
[12]Fisher, F. “Test of Equality Between Sets of Coefficients in Two Linear Regressions: An Expository Note.” Econometrica (03 1970), pp. 361–366.CrossRefGoogle Scholar
[13]Fisher, I.The Theory of Interest. New York: Macmillan (1930).Google Scholar
[14]Fisher, L. “Some New York Stock Market Indices.” Journal of Business, Vol.49, Supplement, (1966), pp. 191–225.Google Scholar
[15]Hess, P. J., and Bicksler, J. L.; “Capital Asset Prices versus Time Series Models as Predictors of Inflation: The Expected Real Rate of Interest and Market Efficiency.” Journal of Financial Economies (12 1975), pp. 341–360.Google Scholar
[16]Ibbotson, R., and Singuefield, R.. “Stocks, Bonds, Bills & Inflation: Year by Year Historical Returns (1926–1974).” Journal of Business (01 1976), pp.11–47.Google Scholar
[17]Jaffe, J., and Mandelker, G.. “The Fisher Effect for Risky Assets: An Empirical Test.” Working paper, Carnegie-Mellon University, Pittsburgh, Pa. (09 1974).Google Scholar
[18]Jaffe, J., and Mandelker, G.. “The Fisher Effect for Risky Assets: An Empirical Test.” Journal of Finance (05 1976).CrossRefGoogle Scholar
[19]Jaffe, J., and Mandelker, G.. “Inflation and the Holding Period Return on Bonds.” Working paper, Carnegie-Mellon University, Pittsburgh, Pa. (07 1976).Google Scholar
[20]Jaffe, J., and Merville, L.. “Stock Price Dependencies and the Valuation of Risky Assets with Discontinuous Temporal Returns.” Journal of Finance (12 1974), pp. 1437–1448.Google Scholar
[21]Kessel, R. A.The Cyclical Behavior of the Term Structure of Interest Rates. National Bureau of Economic Research (1965).Google Scholar
[22]Lintner, J. “Inflation and Common Stock Prices in a Cyclical Context.” National Bureau of Economic Research: Annual Report (1973).Google Scholar
[23]Lintner, J. “Inflation and Security Returns.” Journal of Finance, Vol. 30, No. 2 (05 1975).Google Scholar
[24]Malkiel, B.The Term Structure of Interest Rates. Princeton University Press: Princeton, NJ (1966).Google Scholar
[25]McCallum, J. S. “The Expected Holding Period Return Uncertainty and the Term Structure of Interest Rates.” Journal of Finance (05 1975), pp. 307–324.CrossRefGoogle Scholar
[26]Mundell, R. “Inflation and Real Interest.” Journal of Political Economy, Vol. 71, No. 3 (06 1963), pp. 280–283.CrossRefGoogle Scholar
[27]Nelson, C. R.The Term Structure of Interest Rates. New York: Basic Books, Inc.: (1972).Google Scholar
[28]Nelson, C. R. “Inflation and Rates of Return on Common Stocks.” Journal of Finance (05 1976).Google Scholar
[29]Nelson, C. R., and Schwert, G. William. “On Testing the Hypothesis that the Real Rate of Interest is Constant.” Report No. 7522, Center for Mathematical Studies in Business and Economics, University of Chicago (1975).Google Scholar
[30]Oudet, B. A. “The Variation of the Return on Stocks in Periods of Inflation.” Journal of Financial and Quantitative Analysis, Vol. 7, No. 2 (03 1973), pp. 247–268.CrossRefGoogle Scholar
[31]Roll, R. “Investment Diversification and Bond Maturity.” Journal of Finance, (03 1971).CrossRefGoogle Scholar
[32]Roll, R. “Interest Rates on Monetary Assets and Commodity Price Index Changes.” Journal of Finance, Vol. 27, No. 2 (05 1972), pp. 251–277.CrossRefGoogle Scholar
[33]Santomero, Anthony M. “A Note on Interest Rates and Prices in General Equilibrium.” Journal of Finance (09 1973), pp. 997–1000.Google Scholar
[34]Stiglitz, J. “Portfolio Allocation with Many Risky Assets.” In Mathematical Methods in Investment and Finance, edited by Swego, and Shell, . North Holland Publishing Co. (1972).Google Scholar
[35]Treynor, J. L. “Interest Rates and Inflation.” Unpublished paper (1976).Google Scholar
[36]Treynor, J. L. “Discussion.” Journal of Finance (05 1976).Google Scholar
[37]Van Home, J. C.Function and Analysis of Capital Market Rates. New York: Prentice-Hall (1970).Google Scholar
[38]Van Home, J. C. “Interest Rate Risk and the Term Structure of Interest Rates.” Journal of Political Economy (08 1965), pp. 344–351.Google Scholar