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Is this time different? Reconsidering inflation hedged portfolios through community detection and fuzzy network

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  • Gadzinski, Gregory

Abstract

The resurgence in inflation that started in 2021 made asset allocation suddenly more complicated. In past high inflationary episodes, the academic literature has shown that investors found success in assets such as commodities, real estate, and certain types of stocks, notably in the energy and materials sectors. However, those options may not necessarily outperform in different macro and geopolitical environments, making it more difficult to build robust inflation hedged portfolios. To address this challenge, we first leverage fuzzy clustering and community detection to identify diversified clusters of industries indexes during historical high inflation regimes. Then, we build optimized portfolios of industries for each cluster and compare their performance in the recent inflationary episode. Finally, we assess the performance of “inflation-clustered” portfolios against traditional hedges, to test if optimized stocks allocations in high inflation regimes are better alternatives. We find that leveraging historical inflation information through clustering has been remarkably profitable during the recent period.

Suggested Citation

  • Gadzinski, Gregory, 2026. "Is this time different? Reconsidering inflation hedged portfolios through community detection and fuzzy network," Journal of Empirical Finance, Elsevier, vol. 87(C).
    • Handle: RePEc:eee:empfin:v:87:y:2026:i:c:s0927539826000290
    DOI: 10.1016/j.jempfin.2026.101714
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