Are equities good inflation hedges? A frequency domain perspective1. Issue 1 (17th December 2014)

• Record Type: Journal Article
• Authors: Ciner, Cetin
• Is Part Of: Review of financial economics. Volume 24:Issue 1(2015)
• Page Start: 12
• Page End: 17
• Publication Date: 2014-12-17
• Subjects: Inflation -- Stock returns -- Frequency domain; GO -- G1; Business -- Periodicals; Economics -- Periodicals; Business; Economics; Electronic journals; Periodicals; 332.05
• DOI: 10.1016/j.rfe.2014.12.001
• Languages: English
• ISSNs: 1058-3300

Abstract

Abstract: By using industry level data, we examine the relation between equity returns and inflation in a frequency dependent framework. Our analysis shows that a positive relation in fact exists between equity returns and high frequency inflation shocks for commodity and technology related industries. Since higher frequency shocks are independent from trend and are transitory in nature, our findings imply a positive relation between stock returns and the unexpected component of inflation. Furthermore, we show that the results are robust to firm‐level data by using a sample from the oil industry. Hence, our study provides a new look at the impact of inflation on equities by showing the sensitivity of conclusions in prior work to frequency dependence in data.