Interest and Inflation Risk: Investor Behavior
We examine investor behavior under interest and inflation risk in different scenarios. To that end, we analyze the relation between stock returns and unexpected changes in nominal and real interest rates and inflation for the US stock market. This relation is examined in detail by breaking the resul...
| Main Authors: | , , |
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| Format: | Article |
| Language: | English |
| Published: |
Frontiers Media S.A.
2016-03-01
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| Series: | Frontiers in Psychology |
| Subjects: | |
| Online Access: | http://journal.frontiersin.org/Journal/10.3389/fpsyg.2016.00390/full |
| _version_ | 1819259287070834688 |
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| author | María de la O eGonzález Francisco eJareño Frank S. eSkinner |
| author_facet | María de la O eGonzález Francisco eJareño Frank S. eSkinner |
| author_sort | María de la O eGonzález |
| collection | DOAJ |
| description | We examine investor behavior under interest and inflation risk in different scenarios. To that end, we analyze the relation between stock returns and unexpected changes in nominal and real interest rates and inflation for the US stock market. This relation is examined in detail by breaking the results down from the US stock market level to sector, sub-sector and to individual industries as the ability of different industries to absorb unexpected changes in interest rates and inflation can vary by industry and by contraction and expansion sub-periods. While most significant relations are conventionally negative, some are consistently positive. This suggests some relevant implications on investor behavior. Thus, investments in industries with this positive relation can form a safe haven from unexpected changes in real and nominal interest rates. Gold has an insignificant beta during recessionary conditions hinting that Gold can be a safe haven during recessions. However, Gold also has a consistent negative relation to unexpected changes in inflation thereby damaging the claim that Gold is a hedge against inflation. |
| first_indexed | 2024-12-23T19:07:36Z |
| format | Article |
| id | doaj.art-f9784b6eec6c474ebe875c523d73d12e |
| institution | Directory Open Access Journal |
| issn | 1664-1078 |
| language | English |
| last_indexed | 2024-12-23T19:07:36Z |
| publishDate | 2016-03-01 |
| publisher | Frontiers Media S.A. |
| record_format | Article |
| series | Frontiers in Psychology |
| spelling | doaj.art-f9784b6eec6c474ebe875c523d73d12e2022-12-21T17:34:33ZengFrontiers Media S.A.Frontiers in Psychology1664-10782016-03-01710.3389/fpsyg.2016.00390187991Interest and Inflation Risk: Investor BehaviorMaría de la O eGonzález0Francisco eJareño1Frank S. eSkinner2Universidad de Castilla-La ManchaUniversidad de Castilla-La ManchaBrunel UniversityWe examine investor behavior under interest and inflation risk in different scenarios. To that end, we analyze the relation between stock returns and unexpected changes in nominal and real interest rates and inflation for the US stock market. This relation is examined in detail by breaking the results down from the US stock market level to sector, sub-sector and to individual industries as the ability of different industries to absorb unexpected changes in interest rates and inflation can vary by industry and by contraction and expansion sub-periods. While most significant relations are conventionally negative, some are consistently positive. This suggests some relevant implications on investor behavior. Thus, investments in industries with this positive relation can form a safe haven from unexpected changes in real and nominal interest rates. Gold has an insignificant beta during recessionary conditions hinting that Gold can be a safe haven during recessions. However, Gold also has a consistent negative relation to unexpected changes in inflation thereby damaging the claim that Gold is a hedge against inflation.http://journal.frontiersin.org/Journal/10.3389/fpsyg.2016.00390/fullinterest ratesbusiness cycleStock returnInvestor behaviorUnexpected inflation |
| spellingShingle | María de la O eGonzález Francisco eJareño Frank S. eSkinner Interest and Inflation Risk: Investor Behavior Frontiers in Psychology interest rates business cycle Stock return Investor behavior Unexpected inflation |
| title | Interest and Inflation Risk: Investor Behavior |
| title_full | Interest and Inflation Risk: Investor Behavior |
| title_fullStr | Interest and Inflation Risk: Investor Behavior |
| title_full_unstemmed | Interest and Inflation Risk: Investor Behavior |
| title_short | Interest and Inflation Risk: Investor Behavior |
| title_sort | interest and inflation risk investor behavior |
| topic | interest rates business cycle Stock return Investor behavior Unexpected inflation |
| url | http://journal.frontiersin.org/Journal/10.3389/fpsyg.2016.00390/full |
| work_keys_str_mv | AT mariadelaoegonzalez interestandinflationriskinvestorbehavior AT franciscoejareno interestandinflationriskinvestorbehavior AT frankseskinner interestandinflationriskinvestorbehavior |