Chen, Andrew; Chen, Elaine T; Terrell, Richard
Since The US Treasury's issuance of the inflation-protection securities (TIPS) in January 1997, there has been a great deal of renewed interest in studying various aspects of inflation-indexed bonds. This paper develops an equilibrium capital asset pricing model with uncertain inflation (CAPMUI), of which the Sharpe-Lintner-Mossin and the Roll models are the special cases. Based upon the CAPMUI, we analyse the impact of introducing inflation-indexed bonds on the risk-return relationships in the...[Show more]
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