This project studies information that arrives differently from expectation, not inflation in isolation.
This research examines how the size and direction of U.S. CPI surprises relate to subsequent S&P 500 returns and whether that relationship changes across market environments. The response is evaluated over 1-, 5-, and 10-trading-day windows.
The objective is not to prove that CPI predicts the market. It is to test whether a relationship is detectable, economically meaningful, stable across defensible specifications, and robust to attempts to break it.
How do the size and direction of CPI surprises affect S&P 500 returns over 1, 5, and 10 trading days, and does the market environment change that response?
Actual CPI minus the consensus expectation: what the announcement added beyond the forecast.
Volatility and, where defensible, inflation or monetary-policy regimes measured without post-release information.
Simple returns over clearly aligned 1D, 5D, and 10D event windows, not the index price level.
The models estimate associations around scheduled announcements. Coefficients will not be described as causal effects, trading signals, or proof of prediction.
MARKETS REACT TO
WHAT CHANGED.
Financial markets are forward-looking. Investors form expectations before the Bureau of Labor Statistics publishes CPI, so the reported inflation rate alone is not necessarily new information.
If CPI is close to consensus, much of the information may already be reflected in prices. A meaningful departure from consensus introduces a forecast error that can prompt repricing.
Surpriset = Actualt − ConsensustHeadline CPI YoY
Reported 12-month change in the all-items index.
Headline CPI MoM
Reported one-month change in the all-items index.
Core CPI YoY
Reported 12-month change excluding food and energy.
Core CPI MoM
Reported one-month change excluding food and energy.
Headline surprise
Headline actual minus the matched headline consensus.
Core surprise
Core actual minus the matched core consensus.
Standardized surprise
Raw forecast error scaled by historical surprise dispersion available before event t.
Surprise direction
Hotter, approximately in-line, or cooler than expected under a documented rule.
Pre-release VIX
Last observed VIX value available before the CPI announcement.
Economic regime
Inflation or policy state used only if its definition is fixed and reproducible.
St = Actualt − ConsensustKept in the original percentage-point units so the economic size remains interpretable.
Zt = St / σhistorical,t−1Scales the raw error by dispersion estimated from prior surprises only. The historical window and dispersion estimator remain a flagged protocol decision.
Positive surprise outside the eventual in-line band.
The numerical tolerance has not been chosen and will not be invented after viewing returns.
Negative surprise outside the eventual in-line band.
Reference month describes the inflation period. Release date determines the market event. They are stored separately and never substituted for one another.
R₁ / R₅ / R₁₀
Rk = (Pt+k−1 / Ppre) − 1Proposed primary simple-return anchor: the last close before the 8:30 a.m. ET release through the close of the kth trading session. This definition is displayed as a protocol decision and must be locked before calculation; no silent switch to log returns is permitted.
Primary variables, horizons, hypotheses, and model specifications are fixed before final inference.
Relationships discovered after inspecting the data will be labeled exploratory and will not be rewritten as prior hypotheses.
THE ASSUMPTIONS
STAY VISIBLE.
Rt→t+k = α + β₁Surpriset + β₂HighVIXt + β₃(Surpriset × HighVIXt) + εtBaseline return
Expected return under the reference surprise and volatility conditions.
Surprise relationship
Estimated change in return associated with a one-unit CPI surprise.
Regime difference
Average difference associated with the high-volatility regime.
Interaction
Whether an equally sized surprise is associated with a different response when pre-release volatility is high.
Unexplained variation
Other influences on returns not represented by this specification.
Condition must exist before the release.
HighVIXt may use only VIX information available before the CPI announcement. The exact high-versus-normal criterion is not yet locked, so no regime observations are classified in the published artifact.
Consensus provider
Provider and forecast-snapshot timestamp
Return anchor
Confirm proposed prior-close-to-kth-session convention
In-line band
Numerical tolerance for hot / in-line / cool
Standardization
Historical window and dispersion estimator
VIX regime
Predefined high-volatility criterion
SPX provider
Exact price-series vendor and adjustment policy
RAW / MASTER CPI RELEASE DATASET
Reference month · release date · release time · headline CPI YoY / MoM · core CPI YoY / MoM · headline consensus · core consensus · raw surprises · standardized surprise · source · source timestamp
EVENT-STUDY DATASET
Release date · surprise measures · direction · S&P 500 price anchors · 1D / 5D / 10D returns · pre-release VIX · volatility regime · optional inflation / policy regime · event flags · audit notes
No publication-ready event rows loaded
Sorting, filtering, and event-detail views will activate only after release dates, expectations, returns, regimes, and sources pass validation. Empty is more accurate than publishing invented records.
Actual · consensus · raw surprise · standardized surprise · pre-release VIX · SPX 1D / 5D / 10D · regime labels · sources · overlapping-event notes
RESULTS WILL EARN
THEIR PLACE.
NO EMPIRICAL ESTIMATES PUBLISHED1D
Captures the release session from the last pre-release close through the event-day close.
Lowest window-contamination riskCPI Surprise vs. 1-Day SPX Return
- X
- Standardized CPI surprise
- Y
- SPX 1D return
Scatterplot and model estimate publish only after source and event-date validation.
CPI Surprise vs. 5-Day SPX Return
- X
- Standardized CPI surprise
- Y
- SPX 5D return
Longer window; contamination risk is reported beside the estimate.
CPI Surprise vs. 10-Day SPX Return
- X
- Standardized CPI surprise
- Y
- SPX 10D return
No persistence is assumed; sign changes and null results remain visible.
Hot vs. In-Line vs. Cool
- X
- Predefined surprise class
- Y
- Return distribution
Classification does not activate until the in-line threshold is locked.
Normal vs. High VIX
- X
- Pre-release volatility regime
- Y
- CPI-surprise sensitivity
Uses only information available before the release.
Rolling CPI Sensitivity
- X
- Event time
- Y
- Estimated coefficient
Publishes only if sample support and window length are statistically defensible.
Is the estimate distinguishable from zero?
Report coefficient, standard error, confidence interval, and p-value. A p-value above the chosen threshold means insufficient evidence to reject the null under that specification, not proof of no relationship.
Is the estimated response large enough to matter?
Translate a one-standard-deviation surprise into basis points only after the estimate exists. Statistical significance alone does not establish economic importance.
Try to break the finding.
Alternative specifications challenge the primary result; they are not a search for a preferred p-value.
- 01Raw surprise vs. standardized surprise
- 02Headline vs. core CPI
- 03Month-over-month vs. year-over-year measures
- 041D vs. 5D vs. 10D return windows
- 05Alternative pre-release volatility rules
- 06Full sample vs. defensible economic subperiods
- 07Models with and without influential observations
- 08Heteroskedasticity-robust standard errors
- 09Autocorrelation-robust inference when warranted
The gap is not whether anyone has studied CPI surprises. The question is whether documented relationships remain stable outside one unusual period.
Five sources that define the project’s empirical context, proposed mechanisms, and robustness questions.
Jareño, F., Tolentino, M., & Torrecillas, M. del C. (2018). The relevance of the market and news direction when analyzing the inflation news impact on the US stock market. International Journal of Economics and Financial Issues, 8(2), 113–127.
Jareño, Tolentino, and Torrecillas examine how inflation announcements affect U.S. equities and whether the direction of the news and prevailing market conditions shape returns. Their event study matches CPI and PPI announcements with daily S&P 500 returns from January 1990 through April 2013. They find stronger sector responses to CPI than to PPI, with several statistically significant reactions appearing two days after release. The study is especially useful for this project because it shows that announcement effects are conditional: weaker economic conditions and negative inflation news produce larger responses. It supports modeling state dependence rather than treating every release as equivalent.
Knox, B., & Vissing-Jorgensen, A. (2025, November). The effect of the Federal Reserve on the stock market: Magnitudes, channels, and shocks. Annual Reviews.
Knox and Vissing-Jorgensen survey how Federal Reserve announcements affect equities, focusing on monetary policy surprises around FOMC decisions, the pre-FOMC announcement drift, and the FOMC cycle in stock returns. Their synthesis separates reaction-function news from information about the Fed’s economic outlook and traces the asset-pricing channels through which those shocks operate. The paper's most relevant implication is that reaction-function news appears to matter more than pure Fed information effects. For the CPI project, that mechanism matters because inflation surprises can move stocks partly by changing the expected path of monetary policy.
Kroner, T. N. (2025, March). How markets process macro news: The importance of investor attention. Board of Governors of the Federal Reserve System.
Kroner uses intraday data to study investor attention and financial-market responses to macroeconomic news during the 2021–2023 inflation surge. Responses to most releases remain relatively stable, while bond yields, market-implied inflation expectations, and other asset prices react more strongly to CPI surprises. Attention was unusually high around CPI announcements, and elevated pre-announcement attention was associated with stronger market reactions. This paper provides a direct reason to test whether CPI sensitivity changes across periods and market states instead of imposing a constant relationship.
Modugno, M., & Palazzo, D. (2025, January). Decoding equity market reactions to macroeconomic news. Board of Governors of the Federal Reserve System.
Modugno and Palazzo build activity-news and price-news indexes to measure the market’s response to a broad stream of macroeconomic information. Their indexes explain 34% of quarterly variation in stock returns and connect favorable macro surprises with firm-level improvements in revenue, profitability, financing, and investment. The study shows that macro news is reflected in both aggregate prices and company fundamentals. For this project, it provides a broader benchmark for interpreting CPI as one component of the information set that investors use to update growth and valuation expectations.
Šafár, L. (2026, January 29). Asymmetric S&P 500 reactions to CPI surprises in a high-inflation environment. Applied Economics Letters.
Šafár studies short-horizon S&P 500 responses to U.S. CPI announcements during the 2021–2025 high-inflation regime using a constant mean return event-study model. Cooler-than-expected CPI releases generate large positive abnormal returns across the tested windows, while hotter-than-expected releases produce negative abnormal returns of similar magnitude and in-line releases show little effect. The paper argues that CPI announcements regained market-moving power after 2020 and that the asymmetry is strongest for disinflationary surprises. It directly motivates this project’s tests of sign asymmetry, regime dependence, and persistence across 1-, 5-, and 10-day windows.
STABILITY
Does the relationship persist across broader inflation and policy environments?
MAGNITUDE
Is the response economically meaningful, not merely statistically detectable?
ASYMMETRY
Do hot and cool surprises produce different absolute responses?
PERSISTENCE
Does the estimated response remain across 1D, 5D, and 10D windows?
STATE DEPENDENCE
Does the pre-release market environment change the association?
EVIDENCE THAT WEAKENS THE HYPOTHESIS.
- Coefficients close to zero or confidence intervals too wide to support a useful conclusion
- Failure to reject the null under the confirmatory specification
- Effects disappearing across reasonable alternative specifications
- Opposite or unstable signs across return horizons
- Results driven by a small number of extreme CPI events
- Effects disappearing outside the 2021–2023 inflation surge
- Unstable Surprise × HighVIX interaction estimates
Research question
The information–condition–response framework is defined.
Literature review
Core papers are mapped; broader synthesis is still expanding.
Hypotheses
Four confirmatory questions are specified without requiring significance.
Data collection
Historical releases exist; consensus provenance and provider coverage still require audit.
Data cleaning
Begins after provider, timestamp, and release-date checks are locked.
Exploratory analysis
No published visual estimates until the event dataset passes validation.
Baseline models
Regression estimates have not been published.
Regime analysis
The pre-release VIX rule must be specified first.
Robustness
Runs only after the confirmatory specification is frozen.
Interpretation
Statistical and economic significance will be reported separately.
Paper
The current public artifact is a methodology-first research protocol.
THE PROJECT EVOLVED
AS THE QUESTION SHARPENED.
CPI levels / broad CPI–SPX relationship
Established the topic and assembled the initial historical research base.
CPI announcement event study
Shifted market timing from the CPI reference month to the actual release date.
CPI surprise analysis
Separated the published value from what investors expected before the release.
Regime-conditioned, robustness-tested design
Tests stability, asymmetry, persistence, and sensitivity without requiring significance.
U.S. Bureau of Labor Statistics. Consumer Price Index releases, historical tables, release dates, and methodology. Source ↗
Jareño, F., M. Tolentino, and M. del C. Torrecillas. “The Relevance of the Market and News Direction When Analyzing the Inflation News Impact on the US Stock Market.” International Journal of Economics and Financial Issues, 2018. Source ↗
Knox, B., and A. Vissing-Jorgensen. “The Effect of the Federal Reserve on the Stock Market: Magnitudes, Channels, and Shocks.” Annual Reviews, 2025. Source ↗
Kroner, T. Niklas. “How Markets Process Macro News: The Importance of Investor Attention.” Finance and Economics Discussion Series, Board of Governors of the Federal Reserve System, 2025. DOI ↗
Modugno, M., and D. Palazzo. “Decoding Equity Market Reactions to Macroeconomic News.” Board of Governors of the Federal Reserve System, 2025. Source ↗
Šafár, Leoš, Jakub Sopko, and Michal Mešťan. “Asymmetric S&P 500 Reactions to CPI Surprises in a High-Inflation Environment.” Applied Economics Letters, 2026. DOI ↗
Cboe Global Markets. Historical daily closing values for the Cboe Volatility Index. Source ↗
MacKinlay, A. Craig. “Event Studies in Economics and Finance.” Journal of Economic Literature, 1997.
Market-data and consensus sources. Final provider, coverage, timestamp, and transformation documentation remain open protocol decisions and will be added before empirical publication.
REVISED RESEARCH PROTOCOL / v0.2
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