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چکیده
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This paper presents a new perspective on the Fisher hypothesis in relation to the real stock returns and expected inflation, by using the monthly real stock returns for the S&P 500 and inflation rates in US from January 1990 to December 2016. Results suggest a strong evidence of regime-dependence of stock market return for a two-regime MS-FITGARCH (1, 1). The estimation results for regime 1 are consistent with low variance-high mean regime (expansion phase), while regime 2 is consistent with high variance-low mean regime (recession phase). Furthermore, the estimated coefficient of first lag of inflation in mean equation is negative and significantly different from zero in expansion phase, but insignificant in recession phase, confirming the results indicated by Fisher hypothesis only in recession phase. Results show that first lag of inflation does not affect the probability of staying in expansion or recession phases
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