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Investor Behavior and Flow-through Capability in the US Stock Market
Carlos Cano1, Francisco Jareño1, Marta Tolentino2
1Department of Economic Analysis and Finance, University of Castilla-La Mancha Albacete, Spain.
Abstract:
This paper analyzes investor behavior depending on the flow-through capability (FTC) in the US stock market, because investors seek protection from inflation rate changes, and the FTC (a firm's ability to transmit inflation shocks to the prices of its products and services) is a key factor in investment decisions. Our estimates of the FTC of firms listed on the US stock exchange at the sector level are significantly different among industries, and we demonstrate a direct relationship between changes in stock prices (at the sector level) and FTC. These results would be relevant because they have important implications on investor behavior.
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