Expected inflation and U.S. stock sector indices: A dynamic time-scale tale from inflationary and deflationary crisis periods

Elie Bouri; Ramzi Nekhili; Harald Kinateder; Tonmoy Choudhury

doi:10.1016/j.frl.2023.103845

Expected inflation and U.S. stock sector indices: A dynamic time-scale tale from inflationary and deflationary crisis periods

Elie Bouri, Ramzi Nekhili, Harald Kinateder, Tonmoy Choudhury

Research output: Contribution to journal › Article › peer-review

23 Citations (Scopus)

Abstract

This paper analyses the co-movement between changes in expected inflation and U.S. stock sector returns utilizing a wavelet local multiple correlation approach, which records temporal evolution and potential correlation dynamics at various frequencies. Using daily data from January 2, 2003 to December 30, 2022, we find insignificant correlations in the short term but heterogeneous correlations in longer time periods. After the deflationary GFC period, quantitative easing has turned the long-term correlation negative in some sectors, and since COVID-19, the correlation has been positive. However, energy and materials are pro-inflation sectors in the medium and long term.

Original language	English
Article number	103845
Journal	Finance Research Letters
Volume	55
DOIs	https://doi.org/10.1016/j.frl.2023.103845
Publication status	Published - Jul 2023
Externally published	Yes

Bibliographical note

Publisher Copyright:
© 2023 Elsevier Inc.

Keywords

COVID-19 pandemic
Global financial crisis (GFC)
Russia-Ukraine war
U.S. inflation
U.S. stock sector returns
Wavelet local multiple correlation (WLMC) approach

UN SDGs

This output contributes to the following UN Sustainable Development Goals (SDGs)

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10.1016/j.frl.2023.103845

Cite this

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abstract = "This paper analyses the co-movement between changes in expected inflation and U.S. stock sector returns utilizing a wavelet local multiple correlation approach, which records temporal evolution and potential correlation dynamics at various frequencies. Using daily data from January 2, 2003 to December 30, 2022, we find insignificant correlations in the short term but heterogeneous correlations in longer time periods. After the deflationary GFC period, quantitative easing has turned the long-term correlation negative in some sectors, and since COVID-19, the correlation has been positive. However, energy and materials are pro-inflation sectors in the medium and long term.",

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Expected inflation and U.S. stock sector indices: A dynamic time-scale tale from inflationary and deflationary crisis periods

Abstract

Bibliographical note

Keywords

UN SDGs

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