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September 10, 2025Finance and Economics Discussion SeriesOpen Access

Stagflationary Stock Returns

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Authors

BKBenjamin KnoxYTYannick Timmer

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Overview

High-frequency analysis reveals how inflation perceptions affect stock prices and cash flow expectations.

Key Points

  • Inflation expectations lead to stagnation in nominal cash flows and lower stock prices, indicating investor concern.
  • Investors anticipate rising equity risk premiums and nominal risk-free yields amid higher-than-expected inflation.
  • Those with low market power are projected to suffer larger declines in cash flows due to inflation perceptions.
  • Investor cash flow expectations align closely with those of professional earnings analysts, suggesting consensus.

Cite This Study

Knox et al. (2025) studied this question.

synapsesocial.com/papers/68c1bb5b54b1d3bfb60ecf78https://doi.org/10.17016/feds.2025.056
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