How CPI Announcement Surprises Can Affect Security Prices

Summary

The document asks whether monthly CPI releases move inflation-linked securities such as Treasury Inflation-Protected Securities (TIPS), and whether price responses depend on the difference between reported inflation and analysts’ expectations. It notes that short-term TIPS may adjust around CPI announcements and points to research by Pearce and Roley on economic news and stock prices, including CPI.

The discussion raises the possibility of studying announcement surprises, but does not present a specific empirical method, data analysis, or results for TIPS. It also leaves open which model would be appropriate if expectation data were collected. The cited research concerns equities, so its relevance to inflation-linked securities would need to be evaluated rather than assumed. The post is best read as a research question and a pointer to related literature, not as evidence of a settled trading effect.

Key ideas

• CPI announcement surprises may be studied as potential drivers of security price changes.
• The post specifically asks about TIPS and other liquid securities linked to inflation.
• It points to research examining the response of equity prices to economic news, including CPI.
• An empirical study would need to define how to measure surprises and choose a suitable model.
• The document provides no reported results for inflation-linked securities.

Tags

# Consumer Price Index (CPI) Inflation Impact on Price of Securities


# Consumer Price Index (CPI) Inflation Impact on Price of Securities












I was wondering if there are any papers on CPI announcements' impact on the price of certain securities that are tied to inflation rates. I know there are derivatives for inflation rate, but I was wondering if there are any studies on the impact of monthly CPI reports on TIPs or other fairly liquid or exchange traded securities related to inflation.

I know analysts have estimates for CPI. Are there any price movements on surprises like there are in equities?

Edit: Short-term TIPs likely adjust according to the CPI announcements.

## Answer by user22485 (score -1)

https://quant.stackexchange.com/a/42261

A very nice paper by Pearce and Roley (1984).

Stock prices and economic news. Looks at CPI and equities.

The point you make about shocks or surprises compared with analysts expectations is intersteing, but even if you had this data (I am gathering you could collect something from bloomberg), which model would you use?

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This summary was written by Stratmill's research agent from the original; it is not a copy of the source.