IDEAS home Printed from https://ideas.repec.org/a/gam/jijfss/v5y2017i4p28-d118768.html
   My bibliography  Save this article

A Study of Perfect Hedges

Author

Listed:
  • Stoyu I. Ivanov

    (Department of Accounting and Finance, San José State University, San José, CA 95192-0066, USA)

Abstract

In this study, we attempt to identify the asset which has the best hedging characteristics against inflation. We study stock, bond, commodity, real estate and oil indexes. We also study these indexes tracking exchange traded funds (ETFs) to determine the most beneficial tradable asset in addition to the more theoretical index for inflation hedging. We find that, in our sample, oil is the best hedge against inflation, even though three in total are a good hedge—oil, gold and corn—with corn and oil being complete hedges, while gold is a partial hedge. Two assets have conflicting results depending on whether we examine the index or the ETF: the real estate index is a hedge, whereas real estate ETF is the opposite of a hedge. Similarly, the bond index is not related to inflation, whereas bond ETF is the opposite of a hedge. We find that stocks, soy and beef are not hedges against inflation.

Suggested Citation

  • Stoyu I. Ivanov, 2017. "A Study of Perfect Hedges," IJFS, MDPI, vol. 5(4), pages 1-12, November.
    • Handle: RePEc:gam:jijfss:v:5:y:2017:i:4:p:28-:d:118768
    as

    Download full text from publisher

    File URL: https://www.mdpi.com/2227-7072/5/4/28/pdf
    Download Restriction: no
    File URL: https://www.mdpi.com/2227-7072/5/4/28/
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Paul Alagidede & Theodore Panagiotidis, 2010. "Can common stocks provide a hedge against inflation? Evidence from African countries," Review of Financial Economics, John Wiley & Sons, vol. 19(3), pages 91-100, August.
    2. Bampinas, Georgios & Panagiotidis, Theodore, 2015. "Are gold and silver a hedge against inflation? A two century perspective," International Review of Financial Analysis, Elsevier, vol. 41(C), pages 267-276.
    3. Dipak Ghosh & Eric Levin & Robert E Wright & The Centre for Economic Policy Research, "undated". "Gold as an Inflation Hedge?," Working Papers Series 96/10, University of Stirling, Division of Economics.
    4. Alagidede, Paul & Panagiotidis, Theodore, 2012. "Stock returns and inflation: Evidence from quantile regressions," Economics Letters, Elsevier, vol. 117(1), pages 283-286.
    5. Bampinas, Georgios & Panagiotidis, Theodore, 2016. "Hedging inflation with individual US stocks: A long-run portfolio analysis," The North American Journal of Economics and Finance, Elsevier, vol. 37(C), pages 374-392.
    6. Reboredo, Juan C., 2013. "Is gold a hedge or safe haven against oil price movements?," Resources Policy, Elsevier, vol. 38(2), pages 130-137.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Bošnjak Mile & Novak Ivan & Bašić Maja, 2021. "Capital Market Returns and Inflation Nexus in Croatia: Wavelet Coherence Analysis," Business Systems Research, Sciendo, vol. 12(2), pages 253-267, December.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Selmi, Refk & Mensi, Walid & Hammoudeh, Shawkat & Bouoiyour, Jamal, 2018. "Is Bitcoin a hedge, a safe haven or a diversifier for oil price movements? A comparison with gold," Energy Economics, Elsevier, vol. 74(C), pages 787-801.
    2. Niyati Bhanja & Arif Billah Dar, 2019. "Stock returns and inflation: a tale of two periods in India," Economic Change and Restructuring, Springer, vol. 52(4), pages 413-438, November.
    3. Aviral Kumar Tiwari & Adeolu O. Adewuyi & Olabanji B. Awodumi & David Roubaud, 2022. "Relationship between stock returns and inflation: New evidence from the US using wavelet and causality methods," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 27(4), pages 4515-4540, October.
    4. Nassar S. Al-Nassar & Razzaque H. Bhatti, 2019. "Are common stocks a hedge against inflation in emerging markets?," Journal of Economics and Finance, Springer;Academy of Economics and Finance, vol. 43(3), pages 421-455, July.
    5. Kausik Gangopadhyay & Abhishek Jangir & Rudra Sensarma, 2014. "Forecasting the price of gold: An error correction approach," Working papers 155, Indian Institute of Management Kozhikode.
    6. Bampinas, Georgios & Panagiotidis, Theodore, 2016. "Hedging inflation with individual US stocks: A long-run portfolio analysis," The North American Journal of Economics and Finance, Elsevier, vol. 37(C), pages 374-392.
    7. Tiwari, Aviral Kumar & Aye, Goodness C. & Gupta, Rangan & Gkillas, Konstantinos, 2020. "Gold-oil dependence dynamics and the role of geopolitical risks: Evidence from a Markov-switching time-varying copula model," Energy Economics, Elsevier, vol. 88(C).
    8. Dragos Stefan Oprea, 2014. "The Fisher effect: Evidence from the Romanian Stock Market," International Journal of Academic Research in Business and Social Sciences, Human Resource Management Academic Research Society, International Journal of Academic Research in Business and Social Sciences, vol. 4(5), pages 637-644, May.
    9. Martínez-Sánchez, José F. & Pérez-Lechuga, Gilberto & Venegas-Martínez, Francisco (ed.), 2017. "Modelos para la toma de decisiones en la Ingeniería Económica y Financiera: Un enfoque estocástico Vol 3," Sección de Estudios de Posgrado e Investigación de la Escuela Superios de Economía del Instituto Politécnico Nacional, Escuela Superior de Economía, Instituto Politécnico Nacional, edition 1, volume 3, number 017, July.
    10. Bouoiyour, Jamal & Selmi, Refk & Wohar, Mark E., 2018. "Measuring the response of gold prices to uncertainty: An analysis beyond the mean," Economic Modelling, Elsevier, vol. 75(C), pages 105-116.
    11. Reboredo, Juan C. & Rivera-Castro, Miguel A., 2014. "Can gold hedge and preserve value when the US dollar depreciates?," Economic Modelling, Elsevier, vol. 39(C), pages 168-173.
    12. Aye, Goodness C. & Carcel, Hector & Gil-Alana, Luis A. & Gupta, Rangan, 2017. "Does gold act as a hedge against inflation in the UK? Evidence from a fractional cointegration approach over 1257 to 2016," Resources Policy, Elsevier, vol. 54(C), pages 53-57.
    13. Wang, Xinya & Lucey, Brian & Huang, Shupei, 2022. "Can gold hedge against oil price movements: Evidence from GARCH-EVT wavelet modeling," Journal of Commodity Markets, Elsevier, vol. 27(C).
    14. Kumar, Satish, 2017. "On the nonlinear relation between crude oil and gold," Resources Policy, Elsevier, vol. 51(C), pages 219-224.
    15. Dalina Amonhaemanon & Jan Annaert & Marc J.K. De Ceuster & Hau Le Long, 2014. "The Fisher Hypothesis and Investment Assets: The Vietnamese and Thai Case," International Journal of Financial Research, International Journal of Financial Research, Sciedu Press, vol. 5(4), pages 180-195, October.
    16. Mehmet Balcilar & Zeynel Abidin Ozdemir & Muhammad Shahbaz & Serkan Gunes, 2017. "Does Inflation Cause Gold Prices? Evidence from G7 Countries," Working Papers 15-31, Eastern Mediterranean University, Department of Economics.
    17. Ren, Xiaohang & Wang, Rui & Duan, Kun & Chen, Jinyu, 2022. "Dynamics of the sheltering role of Bitcoin against crude oil market crash with varying severity of the COVID-19: A comparison with gold," Research in International Business and Finance, Elsevier, vol. 62(C).
    18. Mehmet Balcilar & Zeynel Abidin Ozdemir & Muhammad Shahbaz & Serkan Gunes, 2018. "Does inflation cause gold market price changes? evidence on the G7 countries from the tests of nonparametric quantile causality in mean and variance," Applied Economics, Taylor & Francis Journals, vol. 50(17), pages 1891-1909, April.
    19. Thi Hong Van Hoang & Amine Lahiani & David Heller, 2016. "Is gold a hedge against inflation? New evidence from a nonlinear ARDL approach," Post-Print hal-02012307, HAL.
    20. O'Connor, Fergal A. & Lucey, Brian M. & Batten, Jonathan A. & Baur, Dirk G., 2015. "The financial economics of gold — A survey," International Review of Financial Analysis, Elsevier, vol. 41(C), pages 186-205.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:gam:jijfss:v:5:y:2017:i:4:p:28-:d:118768. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: MDPI Indexing Manager (email available below). General contact details of provider: https://www.mdpi.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.