Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/271762 
Year of Publication: 
2022
Series/Report no.: 
CESifo Working Paper No. 10118
Publisher: 
Center for Economic Studies and ifo Institute (CESifo), Munich
Abstract: 
Households participating in financial markets pay attention to inflation news when making their investment decisions, even in an environment of mostly low and stable inflation. ETFs and open-ended mutual funds holding Treasury Inflation-Protected Securities (TIPS) receive inflows from retail investors, and nominal Treasury ETF experience outflows, when long-horizon market-based inflation expectations measures increase. Changes in household survey expectations or in measures of inflation uncertainty do not contribute much in explaining retail TIPS fund flows. Retail flows into TIPS funds are asymmetric, with strong reactions only to positive inflation news, and sticky, with ow responses to news gradually playing out over several months. Retail investors appear to pay some attention to regular Federal Reserve announcements, but major events such as the "taper tantrum" in May 2013, the presidential election in November 2016, and the COVID-19 crisis in March 2020 are associated with particularly large retail TIPS fund flows.
Subjects: 
inflation
market-based expectations
fund flows
inflation hedging
JEL: 
E31
E44
G11
G23
Document Type: 
Working Paper
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