1. David M. Harrison, Ph.D. Real Estate Finance Texas Tech University Inflation and Asset Returns Nominal Return - Real Return -  During Inflationary Periods Example

2. David M. Harrison, Ph.D. Real Estate Finance Texas Tech University The Fisher Equation: How Does Inflation Affect Interest Rates? Empirical Evidence: The Fisher Equation

3. David M. Harrison, Ph.D. Real Estate Finance Texas Tech University Real vs. Nominal Assets Real Assets – Nominal Assets – Expected vs. Unexpected Inflation Expected vs. Actual Returns

4. David M. Harrison, Ph.D. Real Estate Finance Texas Tech University Inflation and Nominal Asset Returns Assume the 1-year nominal rate (r1) is 11.24%. If Inflation is expected to be 8%, what is the expected real return? If inflation turns out to be 10% (i.e. higher than expected… If inflation turns out to be 6% (i.e., lower than expected…

5. David M. Harrison, Ph.D. Real Estate Finance Texas Tech University Inflation and Real Asset Returns Ex. Suppose a firm produces 10 widgets/year at a cost of C per unit where: Caveats:

6. David M. Harrison, Ph.D. Real Estate Finance Texas Tech University Stock Returns and Inflation Major Findings Possible Explanations Empirical Evidence