Stocks, bonds, T-bills and inflation hedging: From great moderation to great recession

Spierdijk, Laura; Umar, Zaghum

doi:10.1016/j.jeconbus.2014.12.002

Cited by 34 publications

(13 citation statements)

References 52 publications

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“…Regardless of the investment horizon, maturity, issuer, risk involved, holding long position in treasury bills prove to have a good inflation hedging capacity. However, for investment durations of more than 6 months, the return of t-bills is positively correlated to the rate of inflation (Spierdijk & Umar, 2015). (Bessembinder, 2018) establishes a link between the bid-ask spread and the interest rates.…”

Section: Discussionmentioning

confidence: 99%

Do stocks outperform treasury bills?

Ninan¹

2020

International Journal of Advanced Scientific Research and Management

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Stocks provide greater return potential than bonds, but with greater volatility along the way." You have probably heard that statement so many times that you simply accept it as a given. But have you ever stopped to ask why? Why have stocks historically produced higher returns than bonds? Why are bonds typically less volatile? This paper helps in understanding the reasons behind these trends. The study highlight the important role of positive skewness in the distribution of individual stock returns, attributable both to skewness in monthly returns and to the effects of compounding. The results help to explain why poorly-diversified active strategies most often underperform market averages.

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Section: Discussionmentioning

confidence: 99%

Do stocks outperform treasury bills?

Ninan¹

2020

International Journal of Advanced Scientific Research and Management

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“…These simulated series are then used to estimate the hedging measures. Following Spierdijk and Umar (2015), we estimate the hedging measures under the assumption that the VAR errors follow the empirical distribution of the VAR residuals.…”

Section: Methodsmentioning

confidence: 99%

The inflation hedging capacity of Islamic and conventional equities

Umar

Kenourgios

Naeem

et al. 2020

JES

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PurposeThis study analyzes the inflation hedging of Islamic and conventional equities by employing 26 indices for the period ranging from January 1996 till August 2018. The authors investigate the decoupling hypothesis for Islamic versus conventional equities across various investment horizons.Design/methodology/approachThe authors employ a vector autoregressive framework coupled with bootstrapping procedure to compute inflation hedging measures. The hedging measures employed account for the inflation hedging capacity in terms of hedging effectiveness as well as the cost of hedging (efficiency). The authors account for various investment horizons ranging from one month to ten years.FindingsAlthough, the authors do not find consistent evidence for the decoupling hypothesis of Islamic and conventional equities in terms of their inflation hedging capacity. However, the authors document that certain Islamic equity indices can be employed to effectively hedge against the risk of inflation.Originality/valueThe main contribution of this study is that the existing literature on the comparative performance of Islamic versus conventional equities against inflation risk is sparse. The purpose of this study is to analyze the inflation hedging attributes of Islamic versus conventional equities, that is, whether Islamic equities render better real returns than their conventional counterparts. It will contribute to the growing literature on the comparison between Islamic and conventional equities by documenting the real return attributes of these two, apparently different, assets. A further contribution is that in order to account for the different investment horizons for different types of investors, this study will quantify the real return attributes of Islamic and conventional equities for short-, medium- and long-term investors.

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“…Moreover, they proposed higher VIX increases commodity returns correlation with equity returns, indicating closer integration. Spierdijk and Umar (2015) focused on analyzing the U.S. stock, bonds and T-bills in relation to inflation during the years 1983-2012 and provided only partial confirmation of the hypothesis, that during the post-180 period, the returns of cyclical stocks exhibit a more positive long-run relation with inflation than the returns of non-cyclical stocks and added that both cyclical and non-cyclical industries had virtually no hedging ability until the fall of Lehman Brothers in September 2008. Moreover, they found out only short positions in long-term bond indices including treasury bonds with maturities of 10 years and longer had some long-run inflation hedging capacity.…”

Section: Long-term Global Market Correlationsmentioning

confidence: 99%

Linkages among U.S. Treasury Bond Yields, Commodity Futures and Stock Market Implied Volatility: New Nonparametric Evidence

Vychytilova¹

2015

JOC

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This paper aims to explore specific cross-asset market correlations over the past fifteen-yearperiod-from January 04, 1999 till April 01, 2015, and within four sub-phases covering both the crisis and the non-crisis periods. On the basis of multivariate statistical methods, we focus on investigating relations between selected well-known market indices-U.S. treasury bond yields-the 30-year treasury yield index (TYX) and the 10-year treasury yield (TNX); commodity futuresthe TR/J CRB; and implied volatility of S&P 500 index-the VIX. We estimate relative logarithmic returns by using monthly close prices adjusted for dividends and splits and run normality and correlation analyses. This paper indicates that the TR/J CRB can be adequately modeled by a normal distribution, whereas the rest of benchmarks do not come from a normal distribution. This paper, inter alia, points out some evidence of a statistically significant negative relationship between bond yields and the VIX in the past fifteen years and a statistically significant negative linkage between the TR/J CRB and the VIX since 2009. In rather general terms, this paper thereafter supports the a priori idea-financial markets are interconnected. Such knowledge can be beneficial for building and testing accurate financial market models, and particularly for the understanding and recognizing market cycles.

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Stocks, bonds, T-bills and inflation hedging: From great moderation to great recession

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Cited by 34 publications

References 52 publications

Do stocks outperform treasury bills?

Do stocks outperform treasury bills?

The inflation hedging capacity of Islamic and conventional equities

Linkages among U.S. Treasury Bond Yields, Commodity Futures and Stock Market Implied Volatility: New Nonparametric Evidence

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