Changes in Inflation Expectations and Firm Performance during Recent Global Economic Shocks

Refk Selmi ()
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Refk Selmi: Eklore-ed School of Management (ex ESC Pau), Pau, France

Annals of Economics and Finance, 2025, vol. 26, issue 2, 731-764

Abstract: Given the theoretically ambiguous relationship between stock prices and inflation, this study contributes to growing literature by emphasizing the im portance of using subjective expectations, rather than objective realizations, to models of asset pricing. An event study and downside risk measures are used to capture sector-specifc sensitivities to expected inflation and monetary policy announcements under varying market conditions and investor return targets. Oil and Gas, Basic Materials, and Technology emerge as the most effective for constructing optimal hedging portfolios when the objective is to minimize downside risk. As investors increase their return targets, portfolio weights shift toward the Technology sector.

Keywords: Inflation expectations; Monetary policy announcements; U.S. stock market reactions; Sectoral and industry-level analysis; Downside risk; Event study (search for similar items in EconPapers)
JEL-codes: E31 E52 G11 G15 (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:cuf:journl:y:2025:v:26:i:2:selmi

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