Individual Common Stocks as Inflation Hedges*

Glenn L. Johnson, Frank K. Reilly and Ralph E. Smith

Journal of Financial and Quantitative Analysis, 1971, vol. 6, issue 3, 1015-1024

Abstract: The results of this study indicate that the individual common stocks in the Dow-Jones. Industrial Average were not consistent inflation hedges. Assuming an 8.2 percent normal required rate of return, none of the common stocks was a complete inflation hedge during all three recent inflationary periods tested. Even assuming a zero normal required rate of return á la traditional investment theory, only six (20 percent) of the thirty common stocks sampled were inflation hedges during all three inflationary periods.

Date: 1971
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