Abstract

http://ssrn.com/abstract=1945818
 
 

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Inflation-Hedging Portfolios: Economic Regimes Matter


Ombretta Signori


AXA Investment Managers

Marie Briere


Amundi Asset Management; Paris Dauphine University; Université Libre de Bruxelles

September 12, 2011

Journal of Portfolio Management, 38(4), 2012, p. 43-58.

Abstract:     
The exceptional rise in government deficits following the subprime crisis, the recent commodity price spikes and the increase in inflation volatility have revived the debate on medium to long-term resurgence of inflation. Using a vector-autoregressive model, this paper investigates the relationships between asset returns and inflation and the optimal strategic asset allocation for investors seeking to hedge inflation risk in two different types of macroeconomic regimes. In a volatile macroeconomic environment marked by countercyclical supply shocks, cash, inflation-linked bonds and precious metals play an essential role, while in a more stable environment (“Great Moderation”) with procyclical demand shocks, cash and nominal bonds play the most significant role, followed by precious metals, real estate and equities. An ambitious investor in terms of required real returns should have a larger weighting in equities, real estate and precious metals.

Keywords: inflation hedge, pension finance, shortfall risk, portfolio optimisation

JEL Classification: E31, G11, G12, G23

Accepted Paper Series


Not Available For Download

Date posted: October 19, 2011 ; Last revised: September 2, 2014

Suggested Citation

Signori, Ombretta and Briere, Marie, Inflation-Hedging Portfolios: Economic Regimes Matter (September 12, 2011). Journal of Portfolio Management, 38(4), 2012, p. 43-58.. Available at SSRN: http://ssrn.com/abstract=1945818

Contact Information

Ombretta Signori (Contact Author)
AXA Investment Managers ( email )
Coeur Défense Tour B - La Défense 4
100 Esplanade du Général de Gaulle
PARIS, Paris La Défense Cedex 92932
Marie Briere
Amundi Asset Management ( email )
90 Boulevard Pasteur
Paris, 75015
France
Paris Dauphine University ( email )
place du Maréchal de Lattre de Tassigny
Paris, 75016
France
Université Libre de Bruxelles ( email )
Brussels
Belgium
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