The nature of the relation between stock returns and the three monetary variables of interest rates (bond yields), inflation and money supply growth, while oft studied, is one that remains unclear. We argue that the nature of the relation changes over time, and this variation is largely driven...

Understanding the behaviour of the equity yield and its relation to the bond yield is important for portfolio managers and those engaged in modelling the interaction between asset classes. During the mid-1900s, the equity yield-which was previously greater than the bond yield-declined, while the...