The Effects of Inflation News on High Frequency Stock Returns

53 Pages Posted: 27 Sep 1999

See all articles by Greg Adams

Greg Adams

Brigham Young University - J. Willard and Alice S. Marriott School of Management

Grant Richard McQueen

Brigham Young University - Department of Business Management

Robert Wood

University of Memphis - Fogelman College of Business and Economics

Date Written: July 1999

Abstract

Previous research using daily returns finds conflicting evidence about the relationship between unanticipated inflation (news) and stock returns. We explore the relationship by looking at the response (in minutes and trades) of size-based stock portfolios to the news (controlling for expectations) imbedded in the regularly scheduled Producer Price (PPI) and Consumer Price (CPI) Index announcements. In particular, we answer the following four questions: 1) Do stocks respond to inflation news? 2) Why is the response to PPI news more significant than the response to CPI news? 3) Why do large stocks, but not small stocks, respond significantly to PPI news? and 4) What is the speed and path of that response? In the process of answering these four questions, we also note that varying response speeds to inflation news cannot explain the cross-autocorrelation puzzle.

JEL Classification: G12, G14

Suggested Citation

Adams, Greg L. and McQueen, Grant R. and Wood, Robert A., The Effects of Inflation News on High Frequency Stock Returns (July 1999). Available at SSRN: https://ssrn.com/abstract=176268 or http://dx.doi.org/10.2139/ssrn.176268

Greg L. Adams

Brigham Young University - J. Willard and Alice S. Marriott School of Management ( email )

Provo, UT 84602
United States
801-378-6831 (Phone)
801-378-5984 (Fax)

Grant R. McQueen (Contact Author)

Brigham Young University - Department of Business Management ( email )

TNRB 636
Provo, UT 84602
United States
801-422-3017 (Phone)

Robert A. Wood

University of Memphis - Fogelman College of Business and Economics ( email )

Memphis, TN 38152
United States
901-678-2670 (Phone)
901-678-3006 (Fax)

HOME PAGE: http://www.people.memphis.edu/~rwood/

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