Stocks, Bonds, T-Bills and Inflation Hedging

Spierdijk, Laura; Umar, Zaghum

doi:10.2139/ssrn.1964632

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Stocks, Bonds, T-Bills and Inflation Hedging

Netspar Discussion Paper No. 11/2011-089

44 Pages Posted: 25 Nov 2011 Last revised: 4 May 2013

See all articles by Laura Spierdijk

Laura Spierdijk

University of Twente - Department of Behavioural, Management and Social Sciences - Financial Engineering section

Zaghum Umar

Zayed University - College of Business; Netspar

Date Written: April 25, 2013

Abstract

We analyze the inflation-hedging properties of US stocks, bonds, and T-bills at the subindex level during the 1983 – 2012 period, for investment horizons between 1 month and 10 years. Bonds other than T-bills turn out poor inflation hedges during the entire sample period, regardless of the investment horizon. Stocks in both cyclical and non-cyclical industries have virtually no hedging ability until the fall of Lehman Brothers in September 2008. From that moment on, equity subindices particularly in the cyclical industries started to develop statistically significant hedging ability, even in the short run. Hence, the extent to which investors can benefit from the hedging ability of stocks and bonds varies over time and across industries, maturities and investment horizons.

Keywords: inflation hedging, stocks, bonds, T-bills

JEL Classification: G11, G15, E44

Suggested Citation: Suggested Citation

Spierdijk, Laura and Umar, Zaghum, Stocks, Bonds, T-Bills and Inflation Hedging (April 25, 2013). Netspar Discussion Paper No. 11/2011-089, Available at SSRN: https://ssrn.com/abstract=1964632 or http://dx.doi.org/10.2139/ssrn.1964632