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Inflation and Individual Equities

Author

Listed:
  • Andrew Ang

    (Columbia Business School - Finance and Economics Division)

  • Marie Brière

    (LEDa - Laboratoire d'Economie de Dauphine - Université Paris-Dauphine)

  • Ombretta Signori

    (AXA France - AXA)

Abstract

We study the inflation hedging ability of individual stocks. While the poor inflation hedging ability of the aggregate stock market has long been documented, there is considerable heterogeneity in how individual stock returns covary with inflation. Stocks with good inflation-hedging abilities since 1990 have had higher returns, on average, than stocks with low inflation betas and tend to be drawn from the Oil and Gas and Technology sectors. However, we show that the time variation of stock inflation betas is substantial. This makes it difficult to construct portfolios of stocks that are good inflation hedges out of sample. This is true for portfolios constructed on past inflation betas, sector portfolios, and portfolios constructed from high-paying dividend stocks.

Suggested Citation

  • Andrew Ang & Marie Brière & Ombretta Signori, 2012. "Inflation and Individual Equities," Post-Print hal-01494500, HAL.
  • Handle: RePEc:hal:journl:hal-01494500
    DOI: 10.2469/faj.v68.n4.3
    Note: View the original document on HAL open archive server: https://hal.archives-ouvertes.fr/hal-01494500
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Paulo Maio, 2014. "Another Look at the Stock Return Response to Monetary Policy Actions," Review of Finance, European Finance Association, vol. 18(1), pages 321-371.
    2. Michael Weber & Christian Dorion & Alexandre Jeanneret & Harjoat Bhamra, 2017. "Deflation, Sticky Leverage and Asset Prices," 2017 Meeting Papers 796, Society for Economic Dynamics.
    3. repec:eee:jimfin:v:84:y:2018:i:c:p:23-41 is not listed on IDEAS
    4. Ciner, Cetin, 2015. "Are equities good inflation hedges? A frequency domain perspective," Review of Financial Economics, Elsevier, vol. 24(C), pages 12-17.
    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. Yaniv Konchitchki & Yan Luo & Mary L. Z. Ma & Feng Wu, 2016. "Accounting-based downside risk, cost of capital, and the macroeconomy," Review of Accounting Studies, Springer, vol. 21(1), pages 1-36, March.
    7. Tiong, Serena, 2013. "Pricing inflation-linked variable annuities under stochastic interest rates," Insurance: Mathematics and Economics, Elsevier, vol. 52(1), pages 77-86.

    More about this item

    Keywords

    Portfolios; inflation hedging; stock market;

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates

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