AbstractThis paper examines the relationship between stock returns and several measures of expected inflation. The proxies include the inflation forecasts extracted from U.S. Treasury bill yields, the mean forecast of surveys conducted by the Institute for Social Research, and the predictions from a rolling time‐series model. Unlike recent studies, there does not appear to be a significant negative relationship between stock returns and expected inflation at the beginning of the period. The results are consistent with the hypothesis that stock returns signal changes in expected inflatio