Inflation and Trading

Philip Schnorpfeil, Michael Weber and Andreas Hackethal

No 32470, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: We study how investors respond to inflation combining a customized survey experiment with trading data at a time of historically high inflation. Investors' beliefs about the stock return-inflation relation are very heterogeneous in the cross section and on average too optimistic. Moreover, many investors appear unaware of inflation-hedging strategies despite being otherwise well-informed about inflation and asset returns. Consequently, whereas exogenous shifts in inflation expectations do not impact return expectations, information on past returns during periods of high inflation leads to negative updating about the perceived stock-return impact of inflation, which feeds into return expectations and subsequent actual trading behavior.

JEL-codes: C93 D14 D83 D84 E22 E31 E44 G11 G51 (search for similar items in EconPapers)
Date: 2024-05
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Related works:
Working Paper: Inflation and Trading (2024)
Working Paper: Inflation and trading (2024)
Working Paper: Inflation and trading (2024)
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