The inflation hedging properties of South African and international asset classes

DOI: 10.1080/10293523.2019.1643127
Author(s): Donovan StefanDepartment of Finance and Tax, South Africa, Paul van RensburgDepartment of Finance and Tax, South Africa


Within the period 1965 to 2015 all domestic asset class returns (except cash) are found to exhibit negative correlations with the contemporaneous inflation rate. Cash has hedging qualities due to Reserve Bank inflation targeting policy action but has a low real yield. Furthermore, Engle-Granger cointegration tests show that none of the asset class prices displays a long-term equilibrium relationship with the CPI. Using local growth assets as “inflation hedges” in a “CPI plus” mandate is more of an attempt to outperform inflation than to actually hedge against it.

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