The Adjustment of Stock Prices to Information About Inflation

G. William Schwert

University of Rochester, Rochester, NY 14627
and National Bureau of Economic Research

Journal of Finance, 36 (March 1981) 15-29

This paper analyzes the reaction of stock prices to the new information about inflation. Based on daily returns to the Standard and Poor's composite portfolio from 1953-78, it seems that the stock market reacts negatively to the announcement of unexpected inflation in the Consumer Price Index (C.P.I.), although the magnitude of the reaction is small. It is interesting to note that the stock market seems to react at the time of announcement of the C.P.I., approximately one month after the price data are collected by the Bureau of Labor Statistics.

Key words: Inflation, Efficient markets

JEL Classifications: G14, E31

Cited 143 times in the SSCI and SCOPUS through 2020
© Copyright 1981, American Finance Association
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