Construction of equity portfolios to hedge inflation : Comparative analysis of inflation predictive models
| Autor: | Oliveres Mallol, Agustí |
|---|---|
| Přispěvatelé: | Van Wunnik, Lucas Philippe, Langlois, Hugues, Universitat Politècnica de Catalunya. Departament d'Organització d'Empreses, HEC Paris |
| Jazyk: | angličtina |
| Rok vydání: | 2021 |
| Předmět: | |
| Zdroj: | UPCommons. Portal del coneixement obert de la UPC Universitat Politècnica de Catalunya (UPC) |
| Popis: | Co-movement of stocks, as an asset class, with inflation has been vastly studied in the past, proving that they are negatively correlated. However, the work of (Ang, Brière & Signori, 2012) proves that constructing portfolios by individually picking the right stocks can bring proper inflation hedging abilities. Our work shows that when applying the same methodology as in (Ang, Brière & Signori, 2012) for the period of January 2000 to December 2020, we obtain a three times higher inflation beta on an ex-post basis. This hedging portfolio overweights early-in-the-value-chain and commodity extraction or processing sectors, in line with their previous findings. However, we now see the breakthrough of the financials sector, which was clearly underweighted in previous findings. Forecasting inflation hedging capabilities at the stock level remains to be a hard job. In the same lines as in the previous work of (Ang, Brière & Signori, 2012), constructing portfolios on an ex-ante basis for the period of January 2005 to December 2020 by sorting stocks on their historical inflation beta does not bring statistically significant inflation betas. We also propose an alternative methodology to construct inflation hedging portfolios consisting of using cross-sectional ranks of predictors and dependent variables to predict the next-month co-movement of a stock return with inflation. We show that this methodology improves the statistical significance of the ex-ante returns, obtaining a significance level of 10%. |
| Databáze: | OpenAIRE |
| Externí odkaz: |
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