What do scientists know about inflation hedging?

• Published in: The North American journal of economics and finance Vol. 34; pp. 187 - 214
• Main Authors: Arnold, Stephan, Auer, Benjamin R.
• Format: Journal Article
• Language: English
• Published: Greenwich Elsevier Inc 01.11.2015; Elsevier Science Ltd
• Subjects: Assets; Correlation analysis; Fixed income; Gold; Hedge; Hedging; Inflation; Inflation rates; Real estate; Stocks; Studies; Gold; Hedge; Inflation; Stocks; G11; Fixed income; G10; G15; Real estate
• ISSN: 1062-9408; 1879-0860
• DOI: 10.1016/j.najef.2015.08.005

•This article reviews research on inflation hedging.•We cover equities, gold, bonds and real estate.•A synthesis of previous results indicates no stable inflation protection.•Therefore, we point out several directions for future research. In this article, we give an overview of the state of scientific knowledge on inflation hedging. Specifically, we distill the results of several decades of research analysing the relationship between major asset classes (common stocks, gold, fixed income securities, real estate) and inflation. Even though previous studies have brought forth important facts characterising the interplay of asset returns and inflation rates (e.g., time-dependency, asymmetry, outlier-sensitivity and a tendency towards long-term but limited short-term inflation protection), there is still no consensus on the subject because sample, data and methodology issues preclude strict comparison of most studies. Thus, from a synthesis of the insights gained from our review, we also outline possible directions for future research that may help to establish consensus among researchers.