Common Stocks, Index Linked and Ordinary Bonds, Short Term Interest Rates and Inflation in France, 1960-1975

By Bertrand C. JacquillatRichard Roll
1977| Working Paper No. 379

Rates of return on French common stocks have been below the returns on short-term loans for most holding periods from 1960-75. Furthermore, common stocks have provided negative real returns on average. In contrast, French index linked bonds and ordinary coupon bonds have provided positive real returns and have yielded higher nominal returns than short-term loans. The two types of French bonds are more effective hedges against inflation because their price changes a recorrelated with changes in commodity prices . As in other countries, the short-term loan rate in France is a useful predictor of subsequent inflation. The paper is a methodological companion to Ibbotson and Sinquefield (1976), applied to French data. Text of paper is in French.