Risk and return across inflationary regimes

Jarah D. Macfarlane

Chapter 4 in Understanding Investment Risk and Return, 2025, pp 67-93 from Edward Elgar Publishing

Abstract: This chapter examines the dynamic relationship between risk, return, and inflation across various economic environments. It explores how correlation structures among assets change during deflationary, target inflation, and inflationary regimes, impacting diversification strategies and portfolio risk. The chapter discusses different types of inflation, their economic drivers, and policy implications. It analyzes products designed to reallocate risk automatically through asset allocation, focusing on their operation and suitability for different investors. It also reviews inflation-responsive products and how they aim to protect investors. Case studies from the past century, including the Great Depression, Japan's Lost Decade, 1970s stagflation, and the 2022 reopening shock, provide historical context and insights. The chapter also examines key inflation metrics and their incorporation into investment strategies. By understanding these relationships and employing appropriate investment approaches, investors can better manage their portfolios, achieve long-term financial goals, and potentially increase risk-adjusted returns in varying inflationary environments.

Keywords: Inflationary regimes; Portfolio risk; Correlation structures; Diversification; Asset allocation; Inflation-responsive products (search for similar items in EconPapers)
Date: 2025
ISBN: 9781035339716
References: Add references at CitEc
Citations:

Downloads: (external link)
https://www.elgaronline.com/doi/10.4337/9781035339723.00015 (application/pdf)
Our link check indicates that this URL is bad, the error code is: 403 Forbidden

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:elg:eechap:23600_4

Ordering information: This item can be ordered from
http://www.e-elgar.com

Access Statistics for this chapter

More chapters in Chapters from Edward Elgar Publishing
Bibliographic data for series maintained by Jack Sweeney ().