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May 7, 2026The Journal of Financial Research0 citations

The expected inflation risk premium in the U.S. stock market

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PLPascal LétourneauGPGabriel J. PowerGSGarrett C. C. Smith

Key Points

  • This article examines the relationship between expected inflation risk and asset pricing in the U.S. stock market.
  • Proposes a tradable proxy for expected inflation risk derived from gold futures prices.
  • Employs cross-sectional and time series asset pricing tests to analyze data.
  • Shows that an increase in expected inflation risk lowers contemporaneous asset prices.
  • Finds that higher expected inflation risk increases equity returns.
  • Indicates positive impacts on firms with more pricing power.

Abstract

Abstract This article studies how expected inflation risk affects asset prices. We propose an ex‐ante, tradable proxy for this risk, derived from the term spread of gold futures prices. Using cross‐sectional and time series asset pricing tests, we show how an increase in expected inflation risk lowers contemporaneous prices and raises equity returns. We find that our proxy has a positive impact on firms that have more pricing power.

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Cite This Study

Létourneau et al. (2026) studied this question.

synapsesocial.com/papers/69fbe2f2164b5133a91a2370https://doi.org/10.1111/jfir.70061
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