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Hedging Inflation with Individual US stocks: A long-run portfolio analysis

Listed author(s):
  • Georgios Bampinas

    ()

    (Department of Economics, University of Macedonia, Greece)

  • Theodore Panagiotidis

    ()

    (Department of Economics, University of Macedonia, Greece; The Rimini Centre for Economic Analysis, Italy)

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.

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Paper provided by The Rimini Centre for Economic Analysis in its series Working Paper Series with number 16-11.

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Date of creation: Apr 2016
Handle: RePEc:rim:rimwps:16-11
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