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Changes in Inflation Expectations and Firm Performance during Recent Global Economic Shocks

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Listed:
  • Refk Selmi

    (Eklore-ed School of Management (ex ESC Pau), Pau, France)

Abstract

Given the theoretically ambiguous relationship between stock prices and inflation, this study contributes to growing literature by emphasizing the im portance of using subjective expectations, rather than objective realizations, to models of asset pricing. An event study and downside risk measures are used to capture sector-specifc sensitivities to expected inflation and monetary policy announcements under varying market conditions and investor return targets. Oil and Gas, Basic Materials, and Technology emerge as the most effective for constructing optimal hedging portfolios when the objective is to minimize downside risk. As investors increase their return targets, portfolio weights shift toward the Technology sector.

Suggested Citation

  • Refk Selmi, 2025. "Changes in Inflation Expectations and Firm Performance during Recent Global Economic Shocks," Annals of Economics and Finance, Society for AEF, vol. 26(2), pages 731-764, November.
    • Handle: RePEc:cuf:journl:y:2025:v:26:i:2:selmi
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    References listed on IDEAS

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    Keywords

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    JEL classification:

    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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