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Searching for Assets to Hedge Against Inflation in the U.S. Market

Author

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  • Thomas C. Chiang

    (Austin Professor Emeritus of Finance, Drexel University, LeBow Hall, 3220 Market Street, Philadelphia, PA 19104, USA)

Abstract

This paper provides evidence regarding the relationship between asset returns and (expected) inflation in the U.S. market. Evidence indicates that inflation has a negative effect on stocks, REIT and bonds. However, its effect on housing and gold assets is positive. Evidence concludes both housing and gold tend to show a positive correlation with inflation. This study finds that inflation causes equity market volatility due to investors’ fears about the possibility of interest rate hikes by the Fed, which further aggravates the price of stocks and REIT, but helps to improve bond prices due to a flight-to-quality effect.

Suggested Citation

  • Thomas C. Chiang, 2024. "Searching for Assets to Hedge Against Inflation in the U.S. Market," Review of Pacific Basin Financial Markets and Policies (RPBFMP), World Scientific Publishing Co. Pte. Ltd., vol. 27(01), pages 1-18, March.
    • Handle: RePEc:wsi:rpbfmp:v:27:y:2024:i:01:n:s0219091523500297
    DOI: 10.1142/S0219091523500297
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    More about this item

    Keywords

    Stock returns; inflation; equity market volatility; bond prices; REIT; gold price;
    All these keywords.

    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
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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