IDEAS home Printed from https://ideas.repec.org/a/kap/iaecre/v8y2002i1p20-3410.1007-bf02295560.html
   My bibliography  Save this article

An inflation-hedging portfolio selection model

Author

Listed:
  • Chang-Tesh Hsieh
  • Iskandar Hamwi
  • Tim Hudson

Abstract

This paper suggests an investment strategy which allows an investor to specify the desired return on investment to be equal to the expected rate of inflation plus a certain premium rate, and then helps the investor select those stocks which will provide the greatest chance of meeting that specified investment goal. Copyright International Atlantic Economic Society 2002

Suggested Citation

  • Chang-Tesh Hsieh & Iskandar Hamwi & Tim Hudson, 2002. "An inflation-hedging portfolio selection model," International Advances in Economic Research, Springer;International Atlantic Economic Society, vol. 8(1), pages 20-34, February.
    • Handle: RePEc:kap:iaecre:v:8:y:2002:i:1:p:20-34:10.1007/bf02295560
    DOI: 10.1007/BF02295560
    as

    Download full text from publisher

    File URL: http://hdl.handle.net/10.1007/BF02295560
    Download Restriction: Access to full text is restricted to subscribers.
    File URL: https://libkey.io/10.1007/BF02295560?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Nelson, Charles R, 1976. "Inflation and Rates of Return on Common Stocks," Journal of Finance, American Finance Association, vol. 31(2), pages 471-483, May.
    2. Chambers, Donald R. & Carleton, Willard T. & Waldman, Donald W., 1984. "A New Approach to Estimation of the Term Structure of Interest Rates," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 19(3), pages 233-252, September.
    3. Stone, Bernell K., 1974. "Systematic Interest-Rate Risk in a Two-Index Model of Returns," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 9(5), pages 709-721, November.
    4. Flannery, Mark J & James, Christopher M, 1984. "The Effect of Interest Rate Changes on the Common Stock Returns of Financial Institutions," Journal of Finance, American Finance Association, vol. 39(4), pages 1141-1153, September.
    5. Kwan, Clarence C Y, 1984. "Portfolio Analysis Using Single Index, Multi-index, and Constant Correlation Models: A Unified Treatment," Journal of Finance, American Finance Association, vol. 39(5), pages 1469-1483, December.
    6. Schwert, G William, 1981. "The Adjustment of Stock Prices to Information about Inflation," Journal of Finance, American Finance Association, vol. 36(1), pages 15-29, March.
    7. J. Tobin, 1958. "Liquidity Preference as Behavior Towards Risk," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 25(2), pages 65-86.
    8. Campbell, John Y., 1987. "Stock returns and the term structure," Journal of Financial Economics, Elsevier, vol. 18(2), pages 373-399, June.
    9. Bodie, Zvi, 1976. "Common Stocks as a Hedge against Inflation," Journal of Finance, American Finance Association, vol. 31(2), pages 459-470, May.
    10. Buono, Mark J, 1989. "The Relationship between the Variability of Inflation and Stock Returns: An Empirical Investigation," Journal of Financial Research, Southern Finance Association;Southwestern Finance Association, vol. 12(4), pages 329-339, Winter.
    11. Mark J. Buono, 1989. "The Relationship Between The Variability Of Inflation And Stock Returns: An Empirical Investigation," Journal of Financial Research, Southern Finance Association;Southwestern Finance Association, vol. 12(4), pages 329-339, December.
    12. Oudet, Bruno A., 1973. "Trefftzs Award: The Variation of the Return on Stocks in Periods of Inflation," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 8(2), pages 247-258, March.
    13. William F. Sharpe, 1964. "Capital Asset Prices: A Theory Of Market Equilibrium Under Conditions Of Risk," Journal of Finance, American Finance Association, vol. 19(3), pages 425-442, September.
    14. Branch, Ben, 1974. "Common Stock Performance and Inflation: An International Comparison," The Journal of Business, University of Chicago Press, vol. 47(1), pages 48-52, January.
    15. Hilliard, Jimmy E, 1984. "Hedging Interest Rate Risk with Futures Portfolios under Term Structure Effects," Journal of Finance, American Finance Association, vol. 39(5), pages 1547-1570, December.
    16. Mary Lindahl, 1992. "Minimum variance hedge ratios for stock index futures: Duration and expiration effects," Journal of Futures Markets, John Wiley & Sons, Ltd., vol. 12(1), pages 33-53, February.
    17. Bollerslev, Tim, 1987. "A Conditionally Heteroskedastic Time Series Model for Speculative Prices and Rates of Return," The Review of Economics and Statistics, MIT Press, vol. 69(3), pages 542-547, August.
    18. Levy, H & Markowtiz, H M, 1979. "Approximating Expected Utility by a Function of Mean and Variance," American Economic Review, American Economic Association, vol. 69(3), pages 308-317, June.
    19. Ibbotson, Roger G & Sinquefield, Rex A, 1976. "Stocks, Bonds, Bills, and Inflation: Year-by-Year Historical Returns (1926-1974)," The Journal of Business, University of Chicago Press, vol. 49(1), pages 11-47, January.
    20. Jean C. H. Loo, 1988. "Common Stock Returns, Expected Inflation, And The Rational Expectations Hypothesis," Journal of Financial Research, Southern Finance Association;Southwestern Finance Association, vol. 11(2), pages 165-172, June.
    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. Marie Brière & Ombretta Signori, 2011. "Inflation hedging portfolios in different regimes," BIS Papers chapters, in: Bank for International Settlements (ed.), Portfolio and risk management for central banks and sovereign wealth funds, volume 58, pages 139-163, Bank for International Settlements.
    2. Marie Brière & Ombretta Signori, 2012. "Inflation-Hedging Portfolios : Economic Regimes Matter," Post-Print hal-01494498, HAL.
    3. Mădălina - Gabriela Anghel & Liliana (Dincă) Paschia, 2013. "Using The Capm Model To Estimate The Profitability Of A Financial Instrument Portfolio," Annales Universitatis Apulensis Series Oeconomica, Faculty of Sciences, "1 Decembrie 1918" University, Alba Iulia, vol. 2(15), pages 1-19.
    4. repec:dau:papers:123456789/9296 is not listed on IDEAS
    5. repec:dau:papers:123456789/7744 is not listed on IDEAS

    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. Sellin, Peter, 1998. "Monetary Policy and the Stock Market: Theory and Empirical Evidence," Working Paper Series 72, Sveriges Riksbank (Central Bank of Sweden).
    2. Muhammad Shahbaz & Faridul Islam & Ijaz Ur Rehman, 2016. "Stocks as Hedge against Inflation in Pakistan: Evidence from ARDL Approach," Global Business Review, International Management Institute, vol. 17(6), pages 1280-1295, December.
    3. Mohammad Najand, 1991. "A Test Of The Risk Premium Hypothesis," Journal of Financial Research, Southern Finance Association;Southwestern Finance Association, vol. 14(3), pages 207-216, September.
    4. Javid, Attiya Yasmin & Ahmad, Eatzaz, 2008. "Testing multifactor capital asset pricing model in case of Pakistani market," MPRA Paper 37341, University Library of Munich, Germany.
    5. T.J. Flavin & M.R. Wickens, 2003. "Macroeconomic influences on optimal asset allocation," Review of Financial Economics, John Wiley & Sons, vol. 12(2), pages 207-231.
    6. Samih Antoine Azar, 2013. "The Spurious Relation between Inflation Uncertainty and Stock Returns: Evidence from the U.S," Review of Economics & Finance, Better Advances Press, Canada, vol. 3, pages 99-109, November.
    7. Elyasiani, Elyas & Mansur, Iqbal, 1998. "Sensitivity of the bank stock returns distribution to changes in the level and volatility of interest rate: A GARCH-M model," Journal of Banking & Finance, Elsevier, vol. 22(5), pages 535-563, May.
    8. Peter Sellin, 2001. "Monetary Policy and the Stock Market: Theory and Empirical Evidence," Journal of Economic Surveys, Wiley Blackwell, vol. 15(4), pages 491-541, September.
    9. Somayeh Madadpour & Mohsen Asgari, 2019. "The puzzling relationship between stocks return and inflation: a review article," International Review of Economics, Springer;Happiness Economics and Interpersonal Relations (HEIRS), vol. 66(2), pages 115-145, June.
    10. Pesce, Gabriela & Pedroni, Florencia Verónica, 2021. "Inflación y rendimientos en mercados emergentes: el caso de Argentina || Inflation and returns in emerging markets: the case of Argentina," Revista de Métodos Cuantitativos para la Economía y la Empresa = Journal of Quantitative Methods for Economics and Business Administration, Universidad Pablo de Olavide, Department of Quantitative Methods for Economics and Business Administration, vol. 32(1), pages 341-375, December.
    11. Buono, Mark J, 1989. "The Relationship between the Variability of Inflation and Stock Returns: An Empirical Investigation," Journal of Financial Research, Southern Finance Association;Southwestern Finance Association, vol. 12(4), pages 329-339, Winter.
    12. Antonio Díaz & Carlos Esparcia, 2021. "Dynamic optimal portfolio choice under time-varying risk aversion," International Economics, CEPII research center, issue 166, pages 1-22.
    13. Jamie Alcock & Eva Steiner, 2017. "Unexpected Inflation, Capital Structure, and Real Risk-adjusted Firm Performance," Abacus, Accounting Foundation, University of Sydney, vol. 53(2), pages 273-298, June.
    14. Mark J. Buono, 1989. "The Relationship Between The Variability Of Inflation And Stock Returns: An Empirical Investigation," Journal of Financial Research, Southern Finance Association;Southwestern Finance Association, vol. 12(4), pages 329-339, December.
    15. Thomas A. Lawler, 1978. "Uncertain inflation, systematic risk, and the capital asset pricing model," Working Paper 78-02, Federal Reserve Bank of Richmond.
    16. 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.
    17. Xiangnan Meng & Xin Deng, 2013. "Interest Rate and Foreign Exchange Sensitivity of Bank Stock Returns: Evidence from China," Multinational Finance Journal, Multinational Finance Journal, vol. 17(1-2), pages 77-106, March - J.
    18. Najand, Mohammad & Noronha, Gregory, 1998. "Causal relations among stock returns, inflation, real activity, and interest rates: Evidence from Japan," Global Finance Journal, Elsevier, vol. 9(1), pages 71-80.
    19. Christian Fieberg & Daniel Metko & Thorsten Poddig & Thomas Loy, 2023. "Machine learning techniques for cross-sectional equity returns’ prediction," OR Spectrum: Quantitative Approaches in Management, Springer;Gesellschaft für Operations Research e.V., vol. 45(1), pages 289-323, March.
    20. Keith Vorkink & Douglas J. Hodgson & Oliver Linton, 2002. "Testing the capital asset pricing model efficiently under elliptical symmetry: a semiparametric approach," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 17(6), pages 617-639.

    More about this item

    Statistics

    Access and download statistics

    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:kap:iaecre:v:8:y:2002:i:1:p:20-34:10.1007/bf02295560. 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: Sonal Shukla or Springer Nature Abstracting and Indexing (email available below). General contact details of provider: http://www.springer.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.