Financial assets against inflation: Capturing the hedging properties of gold, housing prices, and equities

Alejandro Almeida; Julia Feria; Antonio Golpe; José Carlos Vides; Alejandro Almeida; Julia Feria; Antonio Golpe; José Carlos Vides

doi:10.3934/NAR.2024014

National Accounting Review

2024, Volume 6, Issue 3: 314-332. doi: 10.3934/NAR.2024014

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Research article

Financial assets against inflation: Capturing the hedging properties of gold, housing prices, and equities

1.
Department of Quantitative Analysis, International University of La Rioja, Logroño, Spain
2.
Department of Economics, University of Huelva, Plaza de la Merced, 11, 21002, Huelva, Spain
3.
Department of Economics, University of Huelva, & Centro de Estudios Avanzados en Física, Matemáticas y Computación, Huelva & Instituto complutense de estudios internacionales, ICEI, Madrid, Spain
4.
Departament de Economía Financiera y Dirección de operaciones, Universidad de Sevilla & Instituto complutense de estudios internacionales, ICEI, Madrid, Spain

Received: 17 April 2024 Revised: 30 May 2024 Accepted: 11 June 2024 Published: 19 June 2024
JEL Codes: C32, C58, E31, E44, E52

In this study, we employed a developed Fractional Cointegrating Vector Autoregressive (FCVAR) model to analyze the relationship between three different securities, i.e., housing prices, S&P500 stock prices and gold, and inflation rate, to determine the hedging properties of each type of asset against inflation shocks. Our analyses covered seven decades; ranging from January 1953 to January 2023. Our results suggested that housing prices and S&P500 performed partially against inflation and gold did not have hedging properties when attending to the full sample. Accounting for structural breaks, we discovered that these results changed. We found that housing prices and the S&P500 showed a superior hedging performance against inflation since the second regime. On the other hand, when we studied the behavior of gold, this security showed the inverse results, i.e., it showed no hedging performance in the second regime. Finally, these results were important for an optimal investment strategy, risk diversification, and monetarism.
- fractional cointegration,
- structural breaks,
- security,
- hedging,
- inflation
Citation: Alejandro Almeida, Julia Feria, Antonio Golpe, José Carlos Vides. 2024: Financial assets against inflation: Capturing the hedging properties of gold, housing prices, and equities, National Accounting Review, 6(3): 314-332. doi: 10.3934/NAR.2024014

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Abstract

In this study, we employed a developed Fractional Cointegrating Vector Autoregressive (FCVAR) model to analyze the relationship between three different securities, i.e., housing prices, S&P500 stock prices and gold, and inflation rate, to determine the hedging properties of each type of asset against inflation shocks. Our analyses covered seven decades; ranging from January 1953 to January 2023. Our results suggested that housing prices and S&P500 performed partially against inflation and gold did not have hedging properties when attending to the full sample. Accounting for structural breaks, we discovered that these results changed. We found that housing prices and the S&P500 showed a superior hedging performance against inflation since the second regime. On the other hand, when we studied the behavior of gold, this security showed the inverse results, i.e., it showed no hedging performance in the second regime. Finally, these results were important for an optimal investment strategy, risk diversification, and monetarism.

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