Investments in Bonds, Stocks, Gold and Real Estate as a Hedge Against Inflation

Abstract

In times of accelerating inflation, financial instruments that protect capital against loss of value are becoming increasingly important. Therefore, an open question remains as to what to invest in to, if not outstrip, at least keep up with the inflation rate in the case of return on investments. This raises the question of whether there are such opportunities in the market. However, according to some authors, this type of analysis is not easy and simple econometric methods are not able to show the appropriate dependencies. An example is real estate investment, which, especially in the short term, may not be a suitable inflation hedge. The purpose of the study is to determine whether investments in the Polish capital market are able to protect capital from depreciation due to inflation. The study began with the analysis of distributions, stationarity of returns and correlation of successive investments and the CPI inflation rate, ending with cointegration analysis using the Engle‑Granger test. The analysis was performed from the first quarter of 2009 to the fourth quarter of 2021. The following indices were used for the study: the TBSPIndex from the bond market, the WIG from the stock market, gold prices in PLN, the NBP hedonic index of real estate prices in seven largest Polish cities and CPI inflation rates published by Statistics Poland (GUS). The analysis led to a negative verification of the research hypothesis, as it could not be proved that the analysed indices and prices are related to the level of inflation. The study fills a gap in the Polish market for analysis of capital protection against inflation. The research concerns only the Polish market, however this issue has not been discussed for years in mature economies either.

Measuring the sensitivity of bond, equity, gold and real estate investment returns to changes in the level of inflation

“…For the other investments, no such rela�onship could be demonstrated. These results are in turn close to those obtained with corresponding or similar methods on the Polish market by Fiszeder & Rowinski (2012), Kasprzak-Czelej (2015), or more recently Wolski (2022Wolski ( , 2023, but also by Stevenson and Murray (1999) on the Irish market. Leaving aside Bitcoin, which could not be studied before, the results achieved are in contradic�on with other studies (e.g., Fama and Schwert 1977, Lee & Isa 2019, Choi & Shin 2022.…”

“…Sta�s�cal tests, such as the Kwiatkowski, Phillips, Schmidt, and Shin unit root test (KPSS test) and the Engle-Granger test, showed no rela�onship between gold prices and the CPI, sugges�ng that gold does not protect capital against loss of value due to infla�on. Wolski (2022) analysed the equity, bond, gold, and residen�al property markets in Poland using cointegra�on analysis with the Engle -Granger test. He cross-referenced quarterly lis�ng data for individual assets with the CPI infla�on index.…”

Dynamics of the Inflation-Hedging Capabilities of Real Estate Investment Portfolios in the Nigerian Property Market

“…Expected inflation describes the level of inflation investors anticipate will occur in future time periods while unexpected inflation results from a reaction caused by new market information not initially considered [7]. Although, different studies have investigated inflation based on the hedging factors of various resources in diverse economies [8][9][10][11][12][13]. In most developed countries, the rate of inflation is managed to a one-digit rate; however, in developing countries like Nigeria, it is mostly in two digits.…”