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Bridge over ocean
1 March 2011 Financial Analysts Journal Volume 67, Issue 2

When Do TIPS Prices Adjust to Inflation Information?

  1. Quentin C. Chu
  2. Deborah N. Pittman
  3. Linda Q. Yu

This event study of market efficiency found that prices of Treasury
Inflation-Protected Securities (TIPS) adjust to inflation information without
delay during the U.S. Consumer Price Index (CPI) survey period and even before
the beginning of the survey period. The cumulative effect of unexpected
inflation on the TIPS holding period returns peaks at the end of the survey
period. After the CPI announcement, there is no discernible price
adjustment.

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