Quantile cointegration analysis of the Fisher hypothesis

Tsong, Ching-Chuan; Lee, Cheng-Feng

doi:10.1016/j.jmacro.2012.11.001

Cited by 23 publications

(11 citation statements)

References 15 publications

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“…Meanwhile, Lee, Clark and Ahn (1998) detected evidence of the Fisher effect, both in the short-run and long-run, for the US Treasury bill. In a recent study, Tsong and Lee (2013) disclosed evidence supporting the Fisher hypothesis in six OECD markets (Australia, Belgium, Canada, Sweden, the US and UK). Their upper quantiles cointegration showed that the nominal 3-month Treasury bill rate responded directly to changes in inflation.…”

Section: Fixed Income Securitiesmentioning

confidence: 96%

“…First, this study provides new evidence on the issue of inflation hedging from the perspective of an emerging market, Malaysia, which is a relatively small emerging market. It has an economic and market environment that is different from developed markets where most studies have been conducted (for example, Kim & Ryoo, 2011;Beckmann & Czudaj, 2013;Tsong & Lee, 2013;Wang, Lee, & Thi, 2013). The focus on Malaysia will, therefore, offer a fresh insight into this topic.…”

Section: Introductionmentioning

confidence: 99%

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Inflation Hedging Properties of Different Asset Classes in Malaysia

Lee

Isa

2019

AJBA

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Manuscript type: Research paper Research aims: The objective of this study is to examine the inflation hedging properties of various asset classes (stock, gold, real estate, Treasury bond and Treasury bill) in the Malaysian context. Design/Methodology/Approach: This is an empirical analysis using quarterly data from the period of 1980 to 2016. The Autoregressive Distributed Lag (ARDL) bounds cointegration model is used for testing the long-run relationship while the error correction model (ECM) is used for testing the short-run dynamics. Research findings: Our results show that stocks and government bonds in Malaysia can provide a complete hedge against inflation in the long-run while real estate shows partial hedging evidence. Gold and Treasury bills, however, are not inflation hedges. For the shortrun, stocks, gold and real estate show evidence of rapid adjustment to changes in inflation while government securities indicate a mild adjustment. Theoretical contributions/Originality: First, this study provides new evidence on inflation hedges from the perspective of an emerging market. Second, this study uses the ARDL and ECM approach to study the long-run and short-run dynamics of asset returns and inflation. This is in contrast to many previous studies that mainly used the Ordinary Least-Squares (OLS) analysis. Third, this study is important for the Malaysian market because previous studies in

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Section: Fixed Income Securitiesmentioning

confidence: 96%

Section: Introductionmentioning

confidence: 99%

Inflation Hedging Properties of Different Asset Classes in Malaysia

Lee

Isa

2019

AJBA

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“…The reason for this choice is the stylized fact that nominal interest rates are highly persistent. In fact, they are so persistent that they often have been modeled as unit‐root processes and have had cointegration techniques applied to them; see, for example, King, Plosser, Stock, and Watson (1991), Bremnes, Gjerde, and Sættem (2001), Liu, Margaritis, and Tourani‐Rad (2008), and Tsong and Lee (2013). However, there are good theoretical reasons why an assumption of a unit root in nominal interest rates can be questioned.…”

Section: Var Analysismentioning

confidence: 99%

The relation between municipal and government bond yields in an era of unconventional monetary policy

2020

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In this paper, we investigate how the 5‐year Swedish municipal bond yield has been related to the corresponding yield on government bonds during the period that the Riksbank has conducted unconventional monetary policy in terms of bond purchases. Using daily Swedish data on bond yields from February 2015 to January 2018, we first conduct an event study to assess the short‐run effects of the Riksbank's bond‐purchase announcements. We then estimate bivariate vector autoregressive models to study the dynamic relationship between the yields. Results from the event study suggest that the accumulated short‐run effect of the Riksbank's announcements was to lower the government bond yield by approximately 40 to 50 basis points and municipal bond yields by 30 to 35 basis points. Our vector autoregressive analysis indicates—in line with the event study—that an unexpected decrease in the government bond yield initially increases the municipal bond‐yield spread. However, after approximately 4 weeks, the effect has been reversed and the municipal bond‐yield spread is lower than it was initially. By conducting this analysis, we contribute to the understanding of the transmission of unconventional monetary policy.

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“…The empirical relationship between (nominal and real) stock returns and inflation has been extensively analyzed in the literature, and many of papers have found a negative correlation between real stock returns and inflation, rejecting, the Fisher and the Wealth Effect hypotheses (Barsky, 1987;Bodie, 1976;Fama, 1981;Fama and Schwert, 1977;Kaul and Seyhum, 1990;Koustas and Serletis, 1999;Lintner, 1975;Ghazali and Ramlee, 2003;Koustas and Lamarche, 2010;Tsong and Lee, 2013). Thus, several theories alternatives to the Fisher Hypothesis have emerged in the literature to try to explain the negative correlation between real stock returns and inflation.…”

Section: Introductionmentioning

confidence: 99%

Are stock returns an inflation hedge for the UK? Evidence from a wavelet analysis using over three centuries of data

Tiwari

Cuñado

Gupta

et al. 2018

Studies in Nonlinear Dynamics &Amp; Econometrics

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This paper analyzes the relationship between stock returns and the inflation rates for the UK over a long time period (February 1790–February 2017) and at different frequencies, by employing a wavelet analysis. We also compare the results for the UK economy with those for the US and two developing countries (India and South Africa). Overall, our results tend to suggest that, while the relationship between stock returns and inflation rates varies across frequencies and time periods, there is no evidence of stock returns acting as an inflation hedge, irrespective of whether we look at the two developed or the two developing markets in our sample.

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Quantile cointegration analysis of the Fisher hypothesis

Cited by 23 publications

References 15 publications

Inflation Hedging Properties of Different Asset Classes in Malaysia

Inflation Hedging Properties of Different Asset Classes in Malaysia

The relation between municipal and government bond yields in an era of unconventional monetary policy

Are stock returns an inflation hedge for the UK? Evidence from a wavelet analysis using over three centuries of data

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