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Are equities good inflation hedges? A frequency domain perspective

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  • Cetin Ciner

Abstract

By using industry level data, we examine the relation between equity returns and inflation in a frequency dependent framework. Our analysis shows that a positive relation in fact exists between equity returns and high frequency inflation shocks for commodity and technology related industries. Since higher frequency shocks are independent from trend and are transitory in nature, our findings imply a positive relation between stock returns and the unexpected component of inflation. Furthermore, we show that the results are robust to firm‐level data by using a sample from the oil industry. Hence, our study provides a new look at the impact of inflation on equities by showing the sensitivity of conclusions in prior work to frequency dependence in data.

Suggested Citation

  • Cetin Ciner, 2015. "Are equities good inflation hedges? A frequency domain perspective," Review of Financial Economics, John Wiley & Sons, vol. 24(1), pages 12-17, January.
    • Handle: RePEc:wly:revfec:v:24:y:2015:i:1:p:12-17
    DOI: 10.1016/j.rfe.2014.12.001
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    References listed on IDEAS

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    Cited by:

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    2. Harsh Parikh & Rama K. Malladi & Frank J. Fabozzi, 2020. "Preparing for higher inflation: Portfolio solutions using U.S. equities," Review of Financial Economics, John Wiley & Sons, vol. 38(3), pages 542-554, July.
    3. Nguyen Thi Thanh Binh, 2024. "Comparative Analysis of Gold, Art, and Wheat as Inflation Hedges," JRFM, MDPI, vol. 17(7), pages 1-24, June.

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