Money illusion in the stock market
Subtitle: the Modigliani-Cohn hypothesis
By: Randolph B. Cohen, Christopher Polk, Tuomo Vuolteenaho.
Contributors: Polk, Christopher.; Vuolteenaho, Tuomo.; National Bureau of Economic Research.
Series: NBER working paper series -- no. 11018.; Working paper series (National Bureau of Economic Research) -- working paper no. 11018.
Publisher: National Bureau of Economic Research
Published: 2005
Place of publication: Cambridge, Mass
Language: eng
Number of pages: 36
Subjects: Stocks -- Econometric models
Description: "Modigliani and Cohn [1979] hypothesize that the stock market suffers from money illusion, discounting real cash flows at nominal discount rates. While previous research has focused on the pricing of the aggregate stock market relative to Treasury bills, the money-illusion hypothesis also has implications for the pricing of risky stocks relative to safe stocks. Simultaneously examining the pricing of Treasury bills, safe stocks, and risky stocks allows us to distinguish money illusion from any change in the attitudes of investors towards risk. Our empirical resuts support the hypothesis that the stock market suffers from money illusion"--National Bureau of Economic Research web site.
Notes: "January 2005."

Includes bibliographical references (p. 28-30).

Also available in PDF from the NBER world wide web site (www.nber.org).