Inflation and individual investors' behavior: Evidence from the German hyperinflation

Fabio Braggion, Felix von Meyerinck, Nic Schaub

Research output: Contribution to journalArticleScientificpeer-review


We analyze how individual investors respond to inflation. We introduce a unique dataset containing information on local inflation and security portfolios of more than 2,000 clients of a German bank between 1920 and 1924, covering the German hyperinflation. We find that individual investors buy less (sell more) stocks when facing higher local inflation. This effect is more pronounced for less sophisticated investors. Moreover, we document a positive relation between local inflation and forgone returns following stock sales. Our findings are consistent with individual investors suffering from money illusion. Alternative explanations such as consumption needs are unlikely to drive our results.
Original languageEnglish
Pages (from-to)5012-5045
JournalReview of Financial Studies
Issue number12
Publication statusPublished - Dec 2023


  • inflation
  • investor behavior
  • individual investors
  • behavioral biases
  • money illusion


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