| Abstract: | This article tests for an association between security returns and anticipated and unanticipated inflation. Inflation accounting disclosures are used to group securities on the basis of their sensitivity to inflation. Nominal security returns and residual returns are independently regressed on the levels of anticipated and unanticipated inflation using a dummy variable model. Results support previous U.S. findings that investors do not seem to use these accounting disclosures in the selection of securities. The evidence indicates, however, that for firms “less affected” by inflation, there exists an association between residual returns and anticipated inflation. |
