Article ID Journal Published Year Pages File Type
974920 The North American Journal of Economics and Finance 2016 19 Pages PDF
Abstract

•We examine whether individual stocks can act as inflation hedgers.•We focus on longer horizons within a cointegration framework.•Stocks that outperform inflation tend to be drawn from the Energy and Industrial sectors.•Stocks average inflation hedging ability declined steadily over the past ten years.

This paper examines whether individual stocks can act as inflation hedgers. We focus on longer investment horizons and construct in- and out-of-sample portfolios based on the long-run relationship (cointegration) of stock prices with respect to consumer prices. Empirical evidence suggests that investors are better off by holding a portfolio of stocks with higher long-run betas as part of asset selection and allocation strategy. Stocks that outperform inflation tend to be drawn from the Energy and Industrial sectors. Finally, we observe that the companies average inflation hedging ability declined steadily over the past ten years, while the number of firms that hedge inflation has decreased considerably after the recent downturn of the US economy.

Related Topics
Social Sciences and Humanities Economics, Econometrics and Finance Economics and Econometrics
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