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Unexpected Inflation, Capital Structure and Real Risk-Adjusted Firm Performance
Working Papers (2014)
  • Jamie Alcock, University of Sydney
  • Eva Steiner, Cornell University School of Hotel Administration
Abstract
Managers can improve real risk-adjusted rm performance by matching nominal assets with nominal liabilities, thereby reducing the sensitivity of real risk-adjusted returns to unexpected inflation. The Net Asset Value (NAV) 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.
Keywords
  • Capital structure,
  • real risk-adjusted performance,
  • nominal assets,
  • REITs,
  • inflation hedging
Publication Date
2014
Citation Information
Jamie Alcock and Eva Steiner. "Unexpected Inflation, Capital Structure and Real Risk-Adjusted Firm Performance" Working Papers (2014)
Available at: http://works.bepress.com/eva-steiner/16/