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Commodity Contracts and Common Stocks as Hedges against Relative Consumer Price Risk

Published online by Cambridge University Press:  06 April 2009

Victor L. Bernard  and
Thomas J. Frecka
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Abstract

Evidence provided here suggests that investors could have identified, ex ante, portfolios that hedge against uncertainty in the prices of three major categories of consumption: food, shelter, and transportation. This finding has implications for the practical importance of multi-period capital asset pricing theories that assume investors can identify such hedge portfolios. The study also provides some surprising evidence about the usefulness of common stocks and commodity futures contracts in hedging against specific price inflation. Certain combinations of common stocks serve as effective hedges, but combinations of commodity futures contracts contribute nothing to hedging ability.

Type
Research Article
Information
Journal of Financial and Quantitative Analysis , Volume 22 , Issue 2 , June 1987 , pp. 169 - 188
Copyright
Copyright © School of Business Administration, University of Washington 1987

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References

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