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Unexpected Inflation, Capital Structure, and Real Risk‐adjusted Firm Performance

Accepted version
Peer-reviewed

Repository DOI


Type

Article

Change log

Authors

Alcock, Jamie 
Steiner, Eva 

Abstract

jats:pManagers can improve real risk‐adjusted firm performance by matching nominal assets with nominal liabilities, thereby reducing the sensitivity of real risk‐adjusted returns to unexpected inflation. The net asset value of US equity real estate investment trusts (REITs) serves as a good proxy for nominal assets and, accordingly, we use a sample of US REITs to test our hypothesis. We find that for the firms in our sample: (i) their real risk‐adjusted performance, and (ii) their inflation‐hedging qualities are inversely related to deviations from this ‘matching‐nominals’ argument. In addition to providing managers with a vehicle to maximize real risk‐adjusted performance, our findings also provide investors with the tools to infer inflation‐hedging qualities of equity investments.</jats:p>

Description

This is the author accepted manuscript. The final version is available fromWiley via https://doi.org/ 10.1111/abac.12102

Keywords

REITs, leverage, inflation hedging, real risk-adjusted performance

Journal Title

Abacus

Conference Name

Journal ISSN

0001-3072
1467-6281

Volume Title

53

Publisher

Wiley