TY  - JOUR
AU  - Shiller,Robert J.
AU  - Beltratti,Andrea E.
TI  - Stock Prices and Bond Yields: Can Their Comovements Be Explained in Terms of Present Value Models?
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 3464
PY  - 1993
Y2  - April 1993
UR  - http://www.nber.org/papers/w3464
L1  - http://www.nber.org/papers/w3464.pdf
N1  - Author contact info:
Robert J. Shiller
Yale University, Cowles Foundation
Box 208281
30 Hillhouse Avenue
New Haven, CT  06520-8281
Tel: 203/432-3708
Fax: 203/432-6167
E-Mail: robert.shiller@yale.edu
AB  - Real stock prices seem to overreact to changes in long-term interest rates. That is, real stock prices drop when long-term interest rates rise (and rise when they fall) more than would be implied by a rational expectations present value model where expectations are based on a vector autoregression. This overreaction is not associated with any overreaction to changes in the short-run inflation rate. Over the last century real stock prices have shown little reaction to changes in inflation rates, and according to the model they should show little reaction. These conclusions were reached from an analysis of annual data in the united states 1871 to 1989 and the united Kingdom 1918 to 1989.
ER  -