Jour Fixe - Inflation and Trading

Philip Schnorpfeil
Monday, 03. June 2024

Jour Fixe - Inflation and Trading

Philip Schnorpfeil
This jour fixe takes place on Monday, 3. June 2024, starting at 5:00 p.m. in HoF E.01 of the House of Finance (Campus Westend). If you want to participate, please send an email to info@eflab.de.

Inflation and Trading

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 feed into return expectations and subsequent actual trading behavior.

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