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INFLATION AND SECURITY RETURNS *

INFLATION AND SECURITY RETURNS * MAY 1975 INFLAnON AND SECURITY RETURNS* JOHN LINTNER** WE ARE MEETING at a time when few matters are of more serious concern to students of finance and to members of the financial community than the impacts of inflation on our financial institutions and markets and its implications for investment policy. The evidence now available clearly indicates that substantial modifications and major new developments in our generally accepted models of security returns and capital market equilibria are going to be required to deal effectively with the impacts of inflation on our markets. The bulk of this address will be devoted to reviewing some of this evidence and suggesting some of the indicated modifications in our by-now conventional models and analytical frameworks. I will also advance some new theory which explains observed relations between inflation and equity market prices and returns, identify further effects of inflation on security markets and financial behavior, and suggest directions for further research on these issues. It will be useful, however, to view these further advances in our work in the perspective of a brief review of a few of the major landmarks in the development of our discipline. Although most of these basic earlier http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png The Journal of Finance Wiley

INFLATION AND SECURITY RETURNS *

The Journal of Finance , Volume 30 (2) – May 1, 1975

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References (1)

Publisher
Wiley
Copyright
1975 The American Finance Association
ISSN
0022-1082
eISSN
1540-6261
DOI
10.1111/j.1540-6261.1975.tb01809.x
Publisher site
See Article on Publisher Site

Abstract

MAY 1975 INFLAnON AND SECURITY RETURNS* JOHN LINTNER** WE ARE MEETING at a time when few matters are of more serious concern to students of finance and to members of the financial community than the impacts of inflation on our financial institutions and markets and its implications for investment policy. The evidence now available clearly indicates that substantial modifications and major new developments in our generally accepted models of security returns and capital market equilibria are going to be required to deal effectively with the impacts of inflation on our markets. The bulk of this address will be devoted to reviewing some of this evidence and suggesting some of the indicated modifications in our by-now conventional models and analytical frameworks. I will also advance some new theory which explains observed relations between inflation and equity market prices and returns, identify further effects of inflation on security markets and financial behavior, and suggest directions for further research on these issues. It will be useful, however, to view these further advances in our work in the perspective of a brief review of a few of the major landmarks in the development of our discipline. Although most of these basic earlier

Journal

The Journal of FinanceWiley

Published: May 1, 1975

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