RT Journal Article
SR Electronic
T1 Inflation-Protecting Asset Allocation: <em>A Downside Risk Analysis</em>
JF The Journal of Portfolio Management
FD Institutional Investor Journals
SP 57
OP 70
DO 10.3905/jpm.2015.41.2.057
VO 41
IS 2
A1 Tim Koniarski
A1 Steffen Sebastian
YR 2015
UL https://pm-research.com/content/41/2/57.abstract
AB This article studies the inflation-protection qualities of cash, bonds, stocks, and direct real estate, and the optimal inflation-protecting asset allocations within a downside risk framework. Using a value-at-risk model to capture predictable price dynamics, the authors find that the inflation-hedging properties of assets substantially change over the investment horizon. Cash is clearly the best hedge against inflation in the short run. However, as the investment horizon increases, bonds, stocks, and real estate become the more attractive options, with real estate exhibiting the best inflation-protection qualities on a medium- and long-term basis. While cash plays the most important role in short-term portfolios, the weights of the inflation-protecting portfolios shift to real estate, stocks, and bonds as the investment horizon increases.TOPICS: Factor-based models, VAR and use of alternative risk measures of trading risk, statistical methods