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

Abstract We analyze how individual investors respond to inflation. introduce a unique data set containing information on local inflation and security portfolios of more than 2,000 clients German bank between 1920 1924, covering the hyperinflation. find that buy fewer (sell more) stocks when facing higher This effect is pronounced for less sophisticated investors. Moreover, we document positive relation forgone returns following stock sales. Our findings are consistent with suffering from money illusion. Alternative explanations, such as consumption needs, unlikely drive our results. Authors have furnished an Internet Appendix, which available Oxford University Press Web site next link final published paper online