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Int. J. Financial Stud. 2017, 5(4), 28; https://doi.org/10.3390/ijfs5040028

A Study of Perfect Hedges

Department of Accounting and Finance, San José State University, San José, CA 95192-0066, USA
Received: 27 August 2017 / Revised: 22 October 2017 / Accepted: 9 November 2017 / Published: 14 November 2017
(This article belongs to the Special Issue Financial Economics)
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Abstract

In this study, we attempt to identify the asset which has the best hedging characteristics against inflation. We study stock, bond, commodity, real estate and oil indexes. We also study these indexes tracking exchange traded funds (ETFs) to determine the most beneficial tradable asset in addition to the more theoretical index for inflation hedging. We find that, in our sample, oil is the best hedge against inflation, even though three in total are a good hedge—oil, gold and corn—with corn and oil being complete hedges, while gold is a partial hedge. Two assets have conflicting results depending on whether we examine the index or the ETF: the real estate index is a hedge, whereas real estate ETF is the opposite of a hedge. Similarly, the bond index is not related to inflation, whereas bond ETF is the opposite of a hedge. We find that stocks, soy and beef are not hedges against inflation. View Full-Text
Keywords: perfect hedge; exchange traded funds; ETFs perfect hedge; exchange traded funds; ETFs
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Ivanov, S.I. A Study of Perfect Hedges. Int. J. Financial Stud. 2017, 5, 28.

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