Dissertation/Thesis Abstract

Two essays in empirical finance
by Parikh, Harsh, Ph.D., EDHEC Business School (France), 2016, 119; 10294580
Abstract (Summary)

This paper reexamines the inflation-hedging properties of individual equities. When determining inflation betas for individual equities we use multivariate regressions, which utilize all available data and account for equity market factor and reporting lags in inflation indices. We show how such an approach can even be used to create inflation-sensitive strategies for customized inflation indices. The facet of customization is necessary since different kinds of inflation impact different investors. For example, in retirement an investor is more concerned about medical expenses. We illustrate strategies for the US headline CPI, Forbes Cost of Living Extremely Well Index (CLEWI), and the US Medical Care Price Index. When constructing inflation-sensitive portfolios, besides using equal weighting scheme, we show how alternative weighting schemes can be used alongside the choice of inflation sensitive equities to accentuate inflation sensitivity, by using maximum beta optimization or to manage equity risk exposure—low volatility and low equity beta as result of using minimum volatility optimization.

Indexing (document details)
Advisor: Martellini, Lionel
School: EDHEC Business School (France)
School Location: France
Source: DAI-A 78/04(E), Dissertation Abstracts International
Subjects: Finance
Keywords: Active Fixed Income, Cross-Sectional Dispertion, Cross-Sectional Volatility, Inflation Betas, Inflation Sensitive Equities, Rising Rates
Publication Number: 10294580
ISBN: 978-1-369-36960-1
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