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

Thomas C. Chiang ()
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Thomas C. Chiang: Austin Professor Emeritus of Finance, Drexel University, LeBow Hall, 3220 Market Street, Philadelphia, PA 19104, USA

Review of Pacific Basin Financial Markets and Policies (RPBFMP), 2024, vol. 27, issue 01, 1-18

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.

Keywords: Stock returns; inflation; equity market volatility; bond prices; REIT; gold price (search for similar items in EconPapers)
JEL-codes: G11 G12 G15 (search for similar items in EconPapers)
Date: 2024
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DOI: 10.1142/S0219091523500297

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