Inflation and Trading

Philip Schnorpfeil, Michael Weber and Andreas Hackethal

Journal of Financial Economics, 2025, vol. 173, issue C

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 prevailing inflation rates 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.

Keywords: Belief Formation; Field Experiment; Inflation; Trading (search for similar items in EconPapers)
JEL-codes: C93 D14 D83 D84 E22 E31 E44 G11 G51 (search for similar items in EconPapers)
Date: 2025
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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Related works:
Working Paper: Inflation and Trading (2024)
Working Paper: Inflation and Trading (2024)
Working Paper: Inflation and trading (2024)
Working Paper: Inflation and trading (2024)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jfinec:v:173:y:2025:i:c:s0304405x25001746

DOI: 10.1016/j.jfineco.2025.104166

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