IDEAS home Printed from https://ideas.repec.org/a/oup/rfinst/v36y2023i12p5012-5045..html
   My bibliography  Save this article

Inflation and Individual Investors’ Behavior: Evidence from the German Hyperinflation

Author

Listed:
  • Fabio Braggion
  • Felix von
  • Nic Schaub
  • Tarun Ramadorai

Abstract

We analyze how individual investors respond to inflation. We introduce a unique data set containing information on local inflation and security portfolios of more than 2,000 clients of a German bank between 1920 and 1924, covering the German hyperinflation. We find that individual investors buy fewer (sell more) stocks when facing higher local inflation. This effect is more pronounced for less sophisticated investors. Moreover, we 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 have furnished an Internet Appendix, which is available on the Oxford University Press Web site next to the link to the final published paper online

Suggested Citation

  • Fabio Braggion & Felix von & Nic Schaub & Tarun Ramadorai, 2023. "Inflation and Individual Investors’ Behavior: Evidence from the German Hyperinflation," The Review of Financial Studies, Society for Financial Studies, vol. 36(12), pages 5012-5045.
    • Handle: RePEc:oup:rfinst:v:36:y:2023:i:12:p:5012-5045.
    as

    Download full text from publisher

    File URL: http://hdl.handle.net/10.1093/rfs/hhad047
    Download Restriction: Access to full text is restricted to subscribers.
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Fabio Braggion & Felix von Meyerinck & Nic Schaub & Michael Weber & Michael Weber, 2025. "The Long-Term Effects of Inflation on Inflation Expectations," CESifo Working Paper Series 11679, CESifo.
    2. Schnorpfeil, Philip & Weber, Michael & Hackethal, Andreas, 2024. "Inflation and trading," CFS Working Paper Series 727, Center for Financial Studies (CFS).
    3. Lehmann-Hasemeyer Sibylle & Opitz Alexander, 2024. "Data Sources on the 19th and Early 20th Century German Capital Market: Challenges and Opportunities," German Economic Review, De Gruyter, vol. 25(4), pages 371-391.
    4. Schnorpfeil, Philip & Weber, Michael & Hackethal, Andreas, 2024. "Households' response to the wealth effects of inflation," CFS Working Paper Series 728, Center for Financial Studies (CFS).
    5. Philip Schnorpfeil & Michael Weber & Andreas Hackethal & Michael Weber, 2024. "Inflation and Trading," CESifo Working Paper Series 11580, CESifo.

    More about this item

    Keywords

    D14; E31; G11; G41; N14;
    All these keywords.

    JEL classification:

    • D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G41 - Financial Economics - - Behavioral Finance - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making in Financial Markets
    • N14 - Economic History - - Macroeconomics and Monetary Economics; Industrial Structure; Growth; Fluctuations - - - Europe: 1913-

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:oup:rfinst:v:36:y:2023:i:12:p:5012-5045.. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Oxford University Press (email available below). General contact details of provider: https://edirc.repec.org/data/sfsssea.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.