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Author: Mr.Shaun K. Roache
Publisher: International Monetary Fund
ISBN: 1451872372
Category : Business & Economics
Languages : en
Pages : 39
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Book Description
Long-term investors face a common problem-how to maintain the purchasing power of their assets over time and achieve a level of real returns consistent with their investment objectives. While inflation-linked bonds and derivatives have been developed to hedge the effects of inflation, their limited supply and liquidity lead many investors to continue to rely on the indirect hedging properties of traditional asset classes. In this paper, we assess these properties over different time horizons, in the context of a diversified portfolio. Using a vector error correction model, we find that effective short-run hedges, such as commodities, may not work over longer horizons and that tactical asset allocation could enhance investment returns following inflation surprises.
Author: Mr.Shaun K. Roache
Publisher: International Monetary Fund
ISBN: 1451872372
Category : Business & Economics
Languages : en
Pages : 39
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Book Description
Long-term investors face a common problem-how to maintain the purchasing power of their assets over time and achieve a level of real returns consistent with their investment objectives. While inflation-linked bonds and derivatives have been developed to hedge the effects of inflation, their limited supply and liquidity lead many investors to continue to rely on the indirect hedging properties of traditional asset classes. In this paper, we assess these properties over different time horizons, in the context of a diversified portfolio. Using a vector error correction model, we find that effective short-run hedges, such as commodities, may not work over longer horizons and that tactical asset allocation could enhance investment returns following inflation surprises.
Author: Robert Greer
Publisher: McGraw Hill Professional
ISBN: 0071483330
Category : Business & Economics
Languages : en
Pages : 314
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Book Description
Authoritative chapters written by executives at Goldman Sachs, PIMCO, the Chicago Mercantile Exchange, and others Covers key assets that protect against inflation--real estate, commodities, precious metals, inflation-linked bonds, CPI futures, and timber
Author: Shaun K. Roache
Publisher:
ISBN:
Category : Electronic books
Languages : en
Pages :
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Book Description
Author: John Y. Campbell
Publisher: OUP Oxford
ISBN: 019160691X
Category : Business & Economics
Languages : en
Pages : 272
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Book Description
Academic finance has had a remarkable impact on many financial services. Yet long-term investors have received curiously little guidance from academic financial economists. Mean-variance analysis, developed almost fifty years ago, has provided a basic paradigm for portfolio choice. This approach usefully emphasizes the ability of diversification to reduce risk, but it ignores several critically important factors. Most notably, the analysis is static; it assumes that investors care only about risks to wealth one period ahead. However, many investors—-both individuals and institutions such as charitable foundations or universities—-seek to finance a stream of consumption over a long lifetime. In addition, mean-variance analysis treats financial wealth in isolation from income. Long-term investors typically receive a stream of income and use it, along with financial wealth, to support their consumption. At the theoretical level, it is well understood that the solution to a long-term portfolio choice problem can be very different from the solution to a short-term problem. Long-term investors care about intertemporal shocks to investment opportunities and labor income as well as shocks to wealth itself, and they may use financial assets to hedge their intertemporal risks. This should be important in practice because there is a great deal of empirical evidence that investment opportunities—-both interest rates and risk premia on bonds and stocks—-vary through time. Yet this insight has had little influence on investment practice because it is hard to solve for optimal portfolios in intertemporal models. This book seeks to develop the intertemporal approach into an empirical paradigm that can compete with the standard mean-variance analysis. The book shows that long-term inflation-indexed bonds are the riskless asset for long-term investors, it explains the conditions under which stocks are safer assets for long-term than for short-term investors, and it shows how labor income influences portfolio choice. These results shed new light on the rules of thumb used by financial planners. The book explains recent advances in both analytical and numerical methods, and shows how they can be used to understand the portfolio choice problems of long-term investors.
Author: Steven C. Leuthold
Publisher:
ISBN:
Category : Business & Economics
Languages : en
Pages : 242
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Book Description
Author: Roberto Obregon
Publisher:
ISBN:
Category :
Languages : en
Pages : 10
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Book Description
This paper examines inflation and the role of inflation-hedging assets in an institutional portfolio. Even in the current environment of low realized inflation, inflation risk remains, in the form of inflation surprises, which have historically been damaging for equity and bond portfolios. Traditional inflation-hedging assets include commodities, natural resources equities, and TIPS, among others. Meketa Investment Group recommends that investors evaluate inflation risk by focusing on inflation surprises rather than on realized inflation. Furthermore, when allocating to inflation-hedging assets, institutional investors should approach this problem from a total portfolio perspective, which includes determining individual inflation-hedging objectives and considering the return and risk tradeoffs that inflation-hedging assets introduce to a portfolio.
Author: John Y. Campbell
Publisher: Clarendon Lectures in Economic
ISBN: 9780198296942
Category : Asset allocation
Languages : en
Pages : 280
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Book Description
This volume provides a scientific foundation for the advice offered by financial planners to long-term investors. Based upon statistics on asset return behavior and assumed investor objectives, the authors derive optimal portfolio rules that investors can compare with existing rules of thumb.
Author: William J. Bernstein
Publisher:
ISBN: 9780988780316
Category : Asset allocation
Languages : en
Pages : 56
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Book Description
This booklet takes portfolio design beyond the familiar "black box" mean-variance framework. Most importantly, the short-term volatility of financial assets, commonly measured as standard deviation, is a highly imperfect measure of the actual long-horizon perils faced by real-world investors subject to the vagaries of financial and military history. These risks have names--inflation, deflation, confiscation, and devastation--and any useful discussion of portfolio design of necessity incorporates their probabilities, consequences, and costs of mitigation ... This booklet contains ... with luck, a framework within income and all-equity portfolios. This booklet contains ... with luck, a framework within which to think more clearly about risk. Note: the entire Investing for Adults series is not for beginners.
Author: Batyr Komurzoev
Publisher:
ISBN:
Category :
Languages : en
Pages : 306
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Book Description
Inflation is an inevitable part of the current economic and financial system. While the rates of inflation might be different among countries, depending on the management of the economy, one thing common about inflation in various countries is its persistency. The persistency of inflation can only be due to the continuous increase in the money supply at a rate higher than the production of goods and services, which is a common feature of the fiat monetary system that the world economies have adopted today. Faced with continuous inflation, individuals and businesses are forced to hedge against inflation by investing in various assets, rather than keeping their wealth in the form of cash. The current study adopts OLS analysis and cointegration techniques to test gold, real estate and stocks as a hedge against inflation, using quarterly data of six countries for the period from 1991 to 2008. The assets are selected as proxies of both real and financial assets while countries are selected with the objective of presenting countries with different rates of financial and economic development in order to analyze and compare the performance of each asset as a hedge against inflation. The results of the empirical analysis indicate that gold is a good hedge against inflation in most of the cases as compared to real estate and stocks. It performs well as an inflation hedge in both developed and developing economies, but in long run only. Real estate, on the other hand, presents a good inflation hedge in developing countries and mostly in the long run, while stocks as a hedge against inflation performed well in developed countries and mostly in the short run only.
Author: Ben Carlson
Publisher: John Wiley & Sons
ISBN: 1119024927
Category : Business & Economics
Languages : en
Pages : 231
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Book Description
A simple guide to a smarter strategy for the individual investor A Wealth of Common Sense sheds a refreshing light on investing, and shows you how a simplicity-based framework can lead to better investment decisions. The financial market is a complex system, but that doesn't mean it requires a complex strategy; in fact, this false premise is the driving force behind many investors' market "mistakes." Information is important, but understanding and perspective are the keys to better decision-making. This book describes the proper way to view the markets and your portfolio, and show you the simple strategies that make investing more profitable, less confusing, and less time-consuming. Without the burden of short-term performance benchmarks, individual investors have the advantage of focusing on the long view, and the freedom to construct the kind of portfolio that will serve their investment goals best. This book proves how complex strategies essentially waste these advantages, and provides an alternative game plan for those ready to simplify. Complexity is often used as a mechanism for talking investors into unnecessary purchases, when all most need is a deeper understanding of conventional options. This book explains which issues you actually should pay attention to, and which ones are simply used for an illusion of intelligence and control. Keep up with—or beat—professional money managers Exploit stock market volatility to your utmost advantage Learn where advisors and consultants fit into smart strategy Build a portfolio that makes sense for your particular situation You don't have to outsmart the market if you can simply outperform it. Cut through the confusion and noise and focus on what actually matters. A Wealth of Common Sense clears the air, and gives you the insight you need to become a smarter, more successful investor.
