Inflation and bond-stock characteristics of international security returns

Moon K. Kim, Ravi Shukla

Research output: Contribution to journalArticle

Abstract

Purpose - The purpose of this research is to explain the cross-sectional variation in the relation between international security returns and expected inflation based on their sensitivities to world stock and bond factors. Design/methodology/approach - The paper shows regress inflation sensitivities of returns on country indexes and international mutual funds on their sensitivities to world stock and bond indexes. Findings - This paper shows the inflation sensitivity of a security is positively (negatively) related to its sensitivity to the world bond index (world stock index). Research limitations/implications - The paper shows that while the model is applicable to individual securities as well as portfolios, it is tested using portfolios only. Originality/value - The paper shows the results allow one to assess the inflation sensitivity of a security using its sensitivity to the bond and the stock market. The more bond-like a security is, the higher its sensitivity to inflation.

Original languageEnglish (US)
Pages (from-to)241-251
Number of pages11
JournalInternational Journal of Managerial Finance
Volume2
Issue number3
DOIs
StatePublished - Oct 9 2006

Keywords

  • Inflation
  • Interest rates
  • Stock markets

ASJC Scopus subject areas

  • Business, Management and Accounting (miscellaneous)
  • Finance

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