Nominal rates, real rates, and expected inflation: Results from a study of U.S. Treasury Inflation-Protected Securities

Laatsch, Francis E.; Klein, Daniel

doi:10.1016/s1062-9769(02)00145-x

Cited by 12 publications

(12 citation statements)

References 10 publications

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“…Our result on bond yield and inflation is consistent with many previous studies such as Fama and Schwert (1977), Engsted and Tanggaard (2002) and Laatsch and Klein (2003) who had examined government bonds in the US. The positive relationship shown between bond prices and inflation as noted in our study is explained by the expectation theory of term structure of interest rate.…”

Section: Government Bondsupporting

confidence: 92%

“…In another study, Engsted and Tanggaard (2002) observed that the relationship between US bond returns and inflation was positive; it became stronger as the horizon increased. From their study investigating the US government inflation-indexed bonds and inflation for the period of August 1997 to July 2001, Laatsch and Klein (2003) also noted that changes in nominal interest rates were significantly related to changes in expected inflation. However, a contrasting outcome was provided by Al-Khazali (1999) who found that yields on long-term government bond and inflation were not cointegrated in nine Pacific-Basin countries, over the period of 1980-1994.…”

Section: Fixed Income Securitiesmentioning

confidence: 99%

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Inflation Hedging Properties of Different Asset Classes in Malaysia

Lee

Isa

2019

AJBA

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Manuscript type: Research paper Research aims: The objective of this study is to examine the inflation hedging properties of various asset classes (stock, gold, real estate, Treasury bond and Treasury bill) in the Malaysian context. Design/Methodology/Approach: This is an empirical analysis using quarterly data from the period of 1980 to 2016. The Autoregressive Distributed Lag (ARDL) bounds cointegration model is used for testing the long-run relationship while the error correction model (ECM) is used for testing the short-run dynamics. Research findings: Our results show that stocks and government bonds in Malaysia can provide a complete hedge against inflation in the long-run while real estate shows partial hedging evidence. Gold and Treasury bills, however, are not inflation hedges. For the shortrun, stocks, gold and real estate show evidence of rapid adjustment to changes in inflation while government securities indicate a mild adjustment. Theoretical contributions/Originality: First, this study provides new evidence on inflation hedges from the perspective of an emerging market. Second, this study uses the ARDL and ECM approach to study the long-run and short-run dynamics of asset returns and inflation. This is in contrast to many previous studies that mainly used the Ordinary Least-Squares (OLS) analysis. Third, this study is important for the Malaysian market because previous studies in

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Section: Government Bondsupporting

confidence: 92%

Section: Fixed Income Securitiesmentioning

confidence: 99%

Inflation Hedging Properties of Different Asset Classes in Malaysia

Lee

Isa

2019

AJBA

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“…Therefore,"standard" econometric models are no longer valid; rather, the co-integration approach should be employed. There are several examples of the use of this unit root/co-integration approach, beginning with the seminal studies of Rose (1988) [4] and Mishkin (1992) [5], whose methodology was subsequently applied in the more recent studies of Crowder and Wohar (1999) [6], Koustas and Serletis (1999) [7], Rapach (2002) [8], Laatsch and Klein (2003) [9] and Rapach and Weber (2005) [10], amongst many others. Some recent studies opted to use the panel data unit root/co-integration approach, as is the case of Westerlund (2008) [11] and Ozcan and Ari (2015) [12].…”

Section: Introductionmentioning

confidence: 99%

Structural Breaks, Inflation and Interest Rates: Evidence from the G7 Countries

et al. 2017

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This study reconsiders the common unit root/co-integration approach to test for the Fisher effect for the economies of the G7 countries. We first show that nominal interest and inflation rates are better represented as I (0) variables. Later, we use the Bai-Perron procedure to show the existence of structural changes in the Fisher equation. After considering these breaks, we find very limited evidence of a total Fisher effect as the transmission coefficient of the expected inflation rates to nominal interest rates is very different than one.

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“…Its training dataset runs from January 1977 to December 1986 and testing dataset from February 1987 to May 1999. For our empirical experiments, input variable Z i = (z 1i , · · · , z mi ) is built on the basis of Fisher's theory that nominal interest rates are comprised of expected real interest rates and anticipated inflation [8,9,18,28]:…”

Section: Empirical Studiesmentioning

confidence: 99%

Intelligent forecasting for financial time series subject to structural changes

Ahn

Lee

et al. 2009

IDA

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This paper is mainly concerned about intelligent forecasting for financial time series subject to structural changes. For example, it is well known that interest rates are subject to structural changes due to external shocks such as government monetary policy change. Such structural changes usually make prediction harder if they are not properly taken care of. Recently, Oh and Kim (2002a, 2002b) suggested a method that could handle such difficulties efficiently. Their basic idea is to assume that different probabilistic law (and hence different predictor) works for different situations. Their method is termed as two-stage piecewise nonlinear prediction since it is comprised of establishing various situations empirically and then installing a different probabilistic nonlinear law as predictor on each of them. Thus, for its proper prediction functioning, it is essential to identify the law dictating the financial time series presently. In this article we propose and study a mixing approach for better identification of the presently working probabilistic law.

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Nominal rates, real rates, and expected inflation: Results from a study of U.S. Treasury Inflation-Protected Securities

Cited by 12 publications

References 10 publications

Inflation Hedging Properties of Different Asset Classes in Malaysia

Inflation Hedging Properties of Different Asset Classes in Malaysia

Structural Breaks, Inflation and Interest Rates: Evidence from the G7 Countries

Intelligent forecasting for financial time series subject to structural changes

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