Inflation
Faramarz Tahmasebi
Abstract
The purpose of this study is to investigate the impact of inflation on investment in a combination of physical and financial assets. The main research question is how the optimal investment portfolio of the people changes with the change of the inflationary conditions and the escalation of the inflation ...
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The purpose of this study is to investigate the impact of inflation on investment in a combination of physical and financial assets. The main research question is how the optimal investment portfolio of the people changes with the change of the inflationary conditions and the escalation of the inflation rate? For this purpose, the optimal combination of assets such as dollar, gold coin, equity, bonds, housing, bank deposits and land was extracted in different inflationary conditions during the period of 1991-2021 using Markowitz's mean-variance model. The results indicated that assets are moved in the people’s investment portfolio due to the change in the inflationary conditions. Where the inflation rate was lower than its 30-year average, the best investment combination for people were bonds, housing, equiy and bank deposits, respectively. With the escalating inflationary conditions and the inflation rate higher than the 30-year average, the optimal investment portfolio includes bonds, gold coins, equity and land, respectively. Comparing the composition of assets in the first to fourth quartiles of inflation represented that the bonds, housing, equity and gold coin are the first priorities of people's investment.
