Bridge over ocean
1 July 2012 Financial Analysts Journal Volume 68, Issue 4

Inflation and Individual Equities

  1. Andrew Ang, PhD
  2. Marie Brière
  3. Ombretta Signori

Since 1990, stocks with strong inflation-hedging abilities have had higher average returns than stocks with low inflation betas and have tended to be drawn from the technology and oil/gas sectors. The authors found substantial time variation among stock inflation betas, which makes it difficult to construct portfolios from stocks that are strong out-of-sample inflation hedges. This finding holds for sector portfolios, portfolios constructed on past-inflation betas, and portfolios constructed from high-dividend-paying stocks.

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