Industry-specific conditional variances of inflation and stock returns.
Item
-
Title
-
Industry-specific conditional variances of inflation and stock returns.
-
Identifier
-
AAI9130340
-
identifier
-
9130340
-
Creator
-
Lee, Yun Bong.
-
Contributor
-
Adviser: Salih N. Neftci
-
Date
-
1991
-
Language
-
English
-
Publisher
-
City University of New York.
-
Subject
-
Economics, General | Economics, Finance | Economics, Theory
-
Abstract
-
The symmetry between variance over time (volatility) and variance across markets (variability) is proposed by exploring the variance decomposition, alternative to Barro's (1976), within the context of Lucas's model (1973).;A posterior variance (the RSS of linear projection) over time is identical with a posterior variance across markets, which a priori identity between variance over time and variance across markets implies that both variances are not dichotomous but complementary. In that sense, volatility is, in operation, accompanied by variability and further that both variances, in alternation, become each the source of the other.;This thesis proposes, as a combined measure, the industry-specific conditional variance of inflation, which is estimated by autoregressing on both economy-wide and within-industry variabilities with the absolute residuals from a preliminary fit (of industry inflation regressed on general inflation as well as both economy-wide and within-industry variabilities, which function is implied by the SOS decomposition).;The term combined, in the sense that the variance of inflation (recognized as the efficient operation of an economy) is induced not only on over time but also on across markets, embodies the idea that inflation (recognized as an outcome of economic processes) should be analyzed in order to view volatility upon variability.;Both economy-wide and within-industry variabilities as well as the industry-specific conditional variance of inflation are estimated using the most disaggregated monthly data in PPI for the period of 1970-88. Likewise, those of stock returns are also estimated using the monthly stock returns of individual firms in CRSP.;To gauge the extent of symmetry between volatility and variability, the elasticity of industry-specific conditional variance with respect to within-industry variability is estimated. The relation between inflation and stock returns in terms of variance is examined. Also, this thesis presents a striking evidence, contrary to the earlier literature, that the association between within-industry relative price variability and industry-average rate of inflation in the seventies in the United States is not dominated by Food and Petroleum-related industries.
-
Type
-
dissertation
-
Source
-
PQT Legacy CUNY.xlsx
-
degree
-
Ph.D.
