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The Adjustment of Stock Prices to Information About Inflation
Author(s) -
SCHWERT G. WILLIAM
Publication year - 1981
Publication title -
the journal of finance
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 18.151
H-Index - 299
eISSN - 1540-6261
pISSN - 0022-1082
DOI - 10.1111/j.1540-6261.1981.tb03531.x
Subject(s) - economics , stock market , stock (firearms) , monetary economics , inflation (cosmology) , financial economics , portfolio , cost price , stock price , stock market bubble , stock market index , price index , econometrics , biology , mechanical engineering , paleontology , physics , horse , series (stratigraphy) , theoretical physics , engineering
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.