Inflation and Individual Investors' Behavior: Evidence from the German Hyperinflation
| Item Type | Monograph (Working Paper) |
| Abstract | This paper analyzes how individual investors respond to inflation. We introduce a unique dataset containing information on local inflation and security portfolios of more than 2,000 clients of a German bank between 1920 and 1924, covering the hyperinflation. We find that individual investors buy less (sell more) stocks when facing higher local inflation. This effect is more pronounced for less sophisticated investors. We also document a positive relation between local inflation and forgone returns following stock sales. Our findings are consistent with individual investors suffering from money illusion. Alternative explanations such as consumption needs are unlikely to drive our results. |
| Authors | Braggion, Fabio; von Meyerinck, Felix & Schaub, Nic |
| Language | English |
| Subjects | economics finance |
| HSG Classification | contribution to scientific community |
| HSG Profile Area | SOF - System-wide Risk in the Financial System |
| Date | 15 March 2021 |
| Series Name | School of Finance Working Series |
| Volume | 2021 |
| Number | 07 |
| Number of Pages | 73 |
| Contact Email Address | felix.meyerinck@unisg.ch |
| Depositing User | Beatrix Kobelt-Glock |
| Date Deposited | 29 Oct 2021 10:55 |
| Last Modified | 20 Jul 2022 17:46 |
| URI: | https://www.alexandria.unisg.ch/publications/264701 |
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CitationBraggion, Fabio; von Meyerinck, Felix & Schaub, Nic: Inflation and Individual Investors' Behavior: Evidence from the German Hyperinflation. School of Finance Working Series, 2021, 07. Statisticshttps://www.alexandria.unisg.ch/id/eprint/264701
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