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Inflation Hedging for Long-Term Investors
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Author/Editor: |
Attie, Alexander P. | Roache, Shaun K. |
| Authorized for Distribution: |
April 1, 2009 |
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Electronic Access: |
Free Full Text (PDF file size is 1,048KB)
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Disclaimer: This Working Paper should not be reported as representing the views of the IMF. The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate.
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Summary: Long-term investors face a common problem-how to maintain the purchasing power of their assets over time and achieve a level of real returns consistent with their investment objectives. While inflation-linked bonds and derivatives have been developed to hedge the effects of inflation, their limited supply and liquidity lead many investors to continue to rely on the indirect hedging properties of traditional asset classes. In this paper, we assess these properties over different time horizons, in the context of a diversified portfolio. Using a vector error correction model, we find that effective short-run hedges, such as commodities, may not work over longer horizons and that tactical asset allocation could enhance investment returns following inflation surprises.
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Order a print copy
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Series: |
Working Paper No. 09/90 |
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Subject(s): |
Inflation | Capital markets | Private investment | Financial instruments | Hedge funds | Commodities | Asset prices | Economic models |
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Author's keyword(s): |
Inflation
| Hedging
| Investments
| Portfolio Allocation
| Diversification.
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Published: |
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April 1, 2009 |
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Format: |
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Paper |
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Stock No: |
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WPIEA2009090 |
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Pages: |
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37 |
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Price: |
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US$18.00 (Academic Rate: US$18.00 )
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