Sectoral Analysis of the Sensitivity of Stock Market Capitalisation to Inflation Using the Inflation Beta Coefficient

Abstract

Purpose | The objective of the study is to identify and quantify the relationship between changes in the inflation rate and the market capitalisation of companies across individual WSE subsectors, using the inflation beta coefficient over the period 2021–2025. Research method | The study employs the inflation beta coefficient as a measure of the response of the market capitalisation of companies from individual WSE subsectors to changes in the inflation rate over the period 2021–2025, based on quarterly data. Based on the arithmetic mean and standard deviation of the inflation beta coefficient, WSE subsectors were classified into four groups differing in the level and direction of exposure to inflation risk. Results | The conducted research confirms sectoral heterogeneity in the sensitivity of the market capitalisation of listed companies to changes in the inflation rate in Poland over the period from the first quarter of 2021 to the first quarter of 2025. The median values of the inflation beta coefficient for individual subsectors ranged from +1.81 to -0.94. A total of 58% of WSE subsectors exhibited a positive inflation beta coefficient, of which only five can be characterised as hedging against inflation risk (inflation beta above 1). These include metallurgy, fuels and gas, retail chains, new technologies, and leisure and recreation. The most negative inflation beta coefficients were observed in the banking, telecommunications, clothing and cosmetics, and medical equipment and supplies subsectors. Originality / value / implications / recommendations | The inflation beta coefficient may serve as one of the tools supporting risk management in the construction of investment portfolios. While numerous studies describe the relationship between inflation and the valuation of listed companies in developed markets, this study contributes to the existing literature by providing evidence based on companies listed on the Warsaw Stock Exchange.