Inflation and Portfolio Management

Abstract

Inflation effects not only the return but also the risk of the portfolio. To take the impact of inflation on portfolio into account, we propose an uncertain accurate mean-variance model with inflation. Considering the complexity of the financial and social environment, the return rate of risky assets and inflation rate are given by experts' evaluations and treated as uncertain variables. For further discussion, we give the deterministic form of the model. Then we compare our model with a rough model that simply subtracts the inflation rate. By analyzing the difference between the results of our model and that simply subtracts the inflation rate, we show the necessity of our proposed model. After that, we provide and discuss numerical examples to illustrate the significance of the model, and conclude the paper.