Inflation and Nominal Financial Reporting: Implications for Performance and Stock Prices Reportar como inadecuado




Inflation and Nominal Financial Reporting: Implications for Performance and Stock Prices - Descarga este documento en PDF. Documentación en PDF para descargar gratis. Disponible también para leer online.

Abstract

The monetary unit assumption of financial accounting assumes a stable currency i.e., constant purchasing power over time. Yet, even during periods of low inflation or deflation, nominal financial statements violate this assumption. I posit that, while the effects of inflation are not recognized in nominal statements, such effects may have economic consequences. I find that unrecognized inflation gains and losses help predict future cash flows as these gains and losses turn into cash flows over time. I also find significant abnormal returns to inflation-based trading strategies, suggesting that stock prices do not fully reflect the implications of the inflation effects for future cash flows. Additional analysis reveals that stock prices act as if investors do not fully distinguish monetary and nonmonetary assets, which is fundamental to determining the effects of inflation. Overall, this study is the first to show that, although inflation effects are not recognized in nominal financial statements, they have significant economic consequences, even during a period in which inflation is relatively low.



Item Type: MPRA Paper -

Original Title: Inflation and Nominal Financial Reporting: Implications for Performance and Stock Prices-

Language: English-

Keywords: inflation; asset pricing; information; financial reporting; abnormal returns; cash flows; capital markets-

Subjects: D - Microeconomics > D8 - Information, Knowledge, and Uncertainty > D82 - Asymmetric and Private Information ; Mechanism DesignE - Macroeconomics and Monetary Economics > E2 - Consumption, Saving, Production, Investment, Labor Markets, and Informal Economy > E22 - Investment ; Capital ; Intangible Capital ; CapacityE - Macroeconomics and Monetary Economics > E2 - Consumption, Saving, Production, Investment, Labor Markets, and Informal Economy > E27 - Forecasting and Simulation: Models and ApplicationsE - Macroeconomics and Monetary Economics > E3 - Prices, Business Fluctuations, and Cycles > E31 - Price Level ; Inflation ; DeflationE - Macroeconomics and Monetary Economics > E4 - Money and Interest Rates > E44 - Financial Markets and the MacroeconomyG - Financial Economics > G1 - General Financial Markets > G11 - Portfolio Choice ; Investment DecisionsG - Financial Economics > G1 - General Financial Markets > G12 - Asset Pricing ; Trading Volume ; Bond Interest RatesG - Financial Economics > G1 - General Financial Markets > G14 - Information and Market Efficiency ; Event Studies ; Insider TradingG - Financial Economics > G1 - General Financial Markets > G17 - Financial Forecasting and SimulationM - Business Administration and Business Economics ; Marketing ; Accounting ; Personnel Economics > M1 - Business AdministrationM - Business Administration and Business Economics ; Marketing ; Accounting ; Personnel Economics > M4 - Accounting and AuditingM - Business Administration and Business Economics ; Marketing ; Accounting ; Personnel Economics > M4 - Accounting and Auditing > M41 - Accounting-





Autor: Konchitchki, Yaniv

Fuente: https://mpra.ub.uni-muenchen.de/52928/







Documentos relacionados