Inflation and bond‐stock characteristics of international security returns

Moon K. Kim and Ravi Shukla

International Journal of Managerial Finance, 2006, vol. 2, issue 3, 241-251

Abstract: Purpose - The purpose of this research is to explain the cross‐sectional variation in the relation between international security returns and expected inflation based on their sensitivities to world stock and bond factors. Design/methodology/approach - The paper shows regress inflation sensitivities of returns on country indexes and international mutual funds on their sensitivities to world stock and bond indexes. Findings - This paper shows the inflation sensitivity of a security is positively (negatively) related to its sensitivity to the world bond index (world stock index). Research limitations/implications - The paper shows that while the model is applicable to individual securities as well as portfolios, it is tested using portfolios only. Originality/value - The paper shows the results allow one to assess the inflation sensitivity of a security using its sensitivity to the bond and the stock market. The more bond‐like a security is, the higher its sensitivity to inflation.

Keywords: Stock markets; Inflation; Interest rates (search for similar items in EconPapers)
Date: 2006
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Persistent link: https://EconPapers.repec.org/RePEc:eme:ijmfpp:17439130610676493

DOI: 10.1108/17439130610676493

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