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A Correction and Update Regarding Individual Common Stocks as Inflation Hedges

Published online by Cambridge University Press:  19 October 2009

Frank K. Reilly ,
Ralph E. Smith  and
Glenn L. Johnson
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Extract

Although they did not affect the individual rates of return per inflationary period that were the main concern of our study previously published in the Journal, it has recently come to our attention that there were computational errors in the summary weighted average real returns. Thus, we are taking this opportunity to correct the original errors and also to update the study results for the period from December 31, 1968, through December 31, 1973. In the analysis and discussion which follows it is assumed that the reader is familiar with the previous study and the methodology employed. Therefore, Table 1 is simply a correction of Table 4 in the 1971 article. This is followed by a discussion of the revised results and changes in conclusions prompted by the adjusted results. Table 2 contains nominal and real rates of return for the period from December 31, 1968, to December 31, 1973, nominal and real rates of returns for the full period from December 31, 1965, to December 31, 1973, and finally, a new set of weighted average returns using the figures updated through 1973.

Type
Research Article
Information
Journal of Financial and Quantitative Analysis , Volume 10 , Issue 5 , December 1975 , pp. 871 - 880
Copyright
Copyright © School of Business Administration, University of Washington 1975

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References

1 Johnson, Glenn L., Reilly, Frank K., and Smith, Ralph E., “Individual Common Stocks as Inflation Hedges,” Journal of Financial and Quantitative Analysis, vol. 2, no. 3 (June 1971), pp. 1015–1024. We wish to acknowledge Professor William D. Bradford for bringing these errors to our attention.CrossRefGoogle Scholar

2 Fisher, Lawrence, “Outcomes for ‘Random’ Investments in Common Stocks Listed on the New York Stock Exchange,” Journal of Business, vol. 38, no. 2 (April 1965), pp. 149–165.CrossRefGoogle Scholar

3 Johnson, Reilly, and Smith, “Individual Common Stocks,” p. 1023.

4 For an after-tax analysis of aggregate market returns which shows the difference, see Reilly, Frank K., Johnson, Glenn L. and Smith, Ralph E., “A Mote on Common Stocks as Inflation Hedges—The After-Tax Case,” The Southern Journal of Business, vol. 7, no. 4 (November 1972), pp. 101–106.Google Scholar

5 Seligman, Daniel, “A Bad New Era for Common Stocks,” Fortune, vol. 84, no. 4 (October 1971), pp. 73, ffGoogle Scholar; Freund, William C., “What ‘Bad New Era’ for Stocks?” Fortune, vol. 85, no. 4 (April 1972), pp. 45, 46, 48, 50, 52.Google Scholar

6 For a detailed discussion of the adjustment process for different types of companies, see Reilly, Frank K., “Companies and Common Stocks as Inflation Hedges,” The Bulletin (Institute of Finance, New York University, April, 1975).Google Scholar