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- Title
ON THE INFLATION RISK PREMIUM.
- Authors
Chu, Quentin C.; Lee, Cheng F.; Pittman, Deborah N.
- Abstract
The article aims to present a testable hypothesis related to the impact of uncertain inflation on the inflation risk premium between nominal bonds and index-liked gilts, apply data from index-linked gilts traded in Great Britain to empirically test this hypothesis, and provide an empirical evidence for the presence of the inflation risk premium. The findings support the argument that investors pricing capital assets do consider the effect of uncertain inflation on asset returns. Furthermore, the results explain why investors demand an inflation risk premium for holding nominal bonds rather than index-linked gilts, if equity assets perform poorly in hedging against uncertain inflation.
- Publication
Journal of Business Finance & Accounting, 1995, Vol 22, Issue 6, p881
- ISSN
0306-686X
- Publication type
Academic Journal
- DOI
10.1111/j.1468-5957.1995.tb00395.x