Explaining International Equity Valuation Ratios: The Roles of Commodity Price Inflation and Relative Asset Volatilities

CFA Digest ◽  
2011 ◽  
Vol 41 (4) ◽  
pp. 49-51
Author(s):  
Nicholas J. Handley
Keyword(s):  
Commodity Price ◽  
Equity Valuation ◽  
Price Inflation ◽  
International Equity ◽  
Valuation Ratios ◽  
Asset Volatilities

scholarly journals Extracting Inflation from Stock Returns to Test Purchasing Power Parity

2005 ◽  
Vol 95 (1) ◽  
pp. 255-276 ◽  
Author(s):  
Bhagwan Chowdhry ◽  
Richard Roll ◽  
Yihong Xia
Keyword(s):  
Stock Returns ◽  
Purchasing Power Parity ◽  
Strong Support ◽  
Commodity Price ◽  
Relative Price ◽  
Purchasing Power ◽  
Power Parity ◽  
Price Inflation ◽  
Short Run ◽  
Relative Ppp

Relative purchasing power parity (PPP) holds for pure price inflations, which affect prices of all goods and services by the same proportion, while leaving relative prices unchanged. Pure price inflations also affect nominal returns of all traded financial assets by exactly the same amount. Recognizing that relative PPP may not hold for the official inflation data constructed from commodity price indices because of relative price changes and other frictions that cause prices to be “sticky,” we provide a novel method for extracting a proxy for realized pure price inflation from stock returns. We find strong support for relative PPP in the short run using the extracted inflation measures.

Domestic policies and external spillovers

2016 ◽  
Vol 15 (3) ◽  
pp. 254-293
Author(s):  
Magda Kandil
Keyword(s):  
Economic Performance ◽  
Commodity Price ◽  
Domestic Policy ◽  
Real Effective Exchange Rate ◽  
Price Inflation ◽  
Content Type ◽  
Policy Responses ◽  
Commodity Price Shocks ◽  
Domestic Policies ◽  
Using Data

Purpose Using data for a sample of advanced and developing countries, this paper aims to study the responses of monetary growth and the growth of government spending to external spillovers, namely, the growth of exports and imports, movement in the real effective exchange rate and the change in the oil price. The objective is to study movements in domestic policy variables in open economies that are vulnerable to trade and commodity price shocks. Design/methodology/approach The analysis evaluates correlations between the responses of the policy variables to external spillovers. Further, the analysis studies the effects of indicators of economic performance on domestic policy responses to various shifts across countries. Findings Higher variability of real and nominal growth increases the fiscal policy response to external spillovers with an aim to stem further variability. Monetary policies appear to be more responsive to trend price inflation with an aim to stem further inflationary pressures. Fiscal policy’s reaction to trend price inflation aims at striking a balance between countering potential inflationary pressures, as well as recessionary conditions attributed to the various spillovers. Originality/value Overall, the evidence points to the importance of trade and commodity price shifts to the design of domestic policies. Further indicators of economic performance differentiate the degree of policy responses to trade and commodity price developments with a goal to stem inflationary pressures and reduce aggregate uncertainty.

Global Liquidity, Financialization and Commodity Price Inflation

2015 ◽  
Vol 06 (02) ◽  
pp. 1550012
Author(s):  
Kumar Rishabh ◽  
Somnath Sharma
Keyword(s):  
Commodity Price ◽  
Price Inflation ◽  
Inflation Dynamics ◽  
Policy Issues ◽  
Recent Advances ◽  
Money Managers ◽  
Global Liquidity

This paper examines the effect of global liquidity and financialization on commodity price inflation. The novelty of the paper lies in exploiting recent advances in our understanding of global liquidity by separating private liquidity from official liquidity and digging into disaggregated level non-commercial commodity traders data. Private liquidity is found to be inflationary, while official liquidity is not. Among the non-commercial traders, both, active money managers and passive swap dealers seem to have played an important role in commodity inflation dynamics during the period 2006–2012. The paper also discusses emerging policy issues in a rapidly changing global commodities market.

The Rise in Equity Valuation Ratios

FEDS Notes ◽  
2014 ◽  
Vol 2014 (0006) ◽  
Author(s):  
Missaka Warusawitharana ◽  
Keyword(s):  
Equity Valuation ◽  
Valuation Ratios

Do food commodity prices have asymmetric effects on euro-area inflation?

2014 ◽  
Vol 18 (4) ◽  
Author(s):  
Mario Porqueddu ◽  
Fabrizio Venditti
Keyword(s):  
Empirical Analysis ◽  
Euro Area ◽  
Structural Model ◽  
Linear Models ◽  
Commodity Prices ◽  
Commodity Price ◽  
Food Prices ◽  
Impulse Response Functions ◽  
Price Inflation ◽  
The Empirical Analysis

AbstractThis paper analyzes the relationship between commodity prices and consumer food prices in the euro area and in its largest countries (Germany, France and Italy) and tests whether the latter respond asymmetrically to shocks to the former. The issue is of particular interest for those monetary authorities that target headline consumer price inflation, which has been heavily influenced by pronounced swings in international commodity prices in the past decade. The empirical analysis is based on two distinct but complementary approaches. We first use a structural model, identify a shock to commodity prices and check through formal econometric tests whether the Impulse Response Functions of food consumer prices is invariant to the sign of the commodity price shock. Next, we employ predictive regressions and examine the relative forecasting ability of linear models with respect to that of models that allow for sign-dependent nonlinearities. Overall, the empirical analysis uncovers very little evidence of asymmetries.

scholarly journals Estimating the Variance of Food Price Inflation

1993 ◽  
Vol 25 (1) ◽  
pp. 245-252 ◽  
Author(s):  
Noel Blisard ◽  
James R. Blaylock
Keyword(s):  
Price Change ◽  
Index Theory ◽  
Commodity Price ◽  
Food Price ◽  
Relative Price ◽  
Standard Errors ◽  
Independent Observation ◽  
Price Inflation ◽  
Price Changes

AbstractStochastic index theory views each commodity price change as an independent observation on the rate of inflation that can be estimated by averaging over all prices. Our methodology estimates both the overall rate of inflation and relative price changes along with standard errors.

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