Getting to the Core: Inflation Risks Within and Across Asset Classes

WEBINAR, MAY 2022

Nikolai Roussanov, the Moise Y. Safra Professor of Finance at the Wharton School, presented his paper Getting to the Core: Inflation Risks Within and Across Asset Classes, which explores the question of whether “real” assets protect against inflation. The paper is co-authored with Xiang Fang and Yang Liu, both of the University of Hong Kong.

Michael Weber, associate professor of finance at the University of Chicago Booth School of Business, gave a discussion of the paper, followed by live audience Q&A. Chris Geczy, Academic Director of the Jacobs Levy Center, hosted the webinar.

ABOUT THE PAPER

Do “real” assets protect against inflation? Core inflation betas of stocks are negative while energy betas are positive; currencies, commodities, and real estate also mostly hedge against energy inflation but not core. These hedging properties are reflected in the prices of inflation risks: only core inflation carries a negative risk premium, and its magnitude is consistent both within and across asset classes, uniquely among macroeconomic risk factors. The relative contribution of core and energy changes over time, helping explain the time-varying correlation between stock and bond returns. A two-sector New Keynesian model qualitatively accounts for these facts.

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Nikolai Roussanov

Moise Y. Safra Professor of Finance, The Wharton School

Nikolai Roussanov is Moise Y. Safra Professor of Finance at the Wharton School and Research Associate at the National Bureau of Economic Research. His research focuses on areas of interaction between asset pricing and macroeconomics, ranging from equity to fixed income, currency, and commodity markets, to entrepreneurship and individual financial behavior. His articles have been published in the Journal of Finance, Quarterly Journal of Economics, Journal of Financial Economics, Review of Financial Studies, Journal of Monetary Economics, and Management Science, and won a number of prizes, including the 2015 AQR Insight Award. He currently serves as Co-Editor of the Journal of Financial Economics and has in the past served on editorial boards of the Journal of Finance and Journal of Monetary Economics, as Editor of the Review of Asset Pricing Studies, and President of the Macro Finance Society. At Wharton he has taught courses on Behavioral Finance, Fixed Income Securities, and Consumer Financial Decision Making to undergraduate and MBA students, as well as Empirical Methods in Finance aimed at students in the doctoral program.

Roussanov received an undergraduate degree in mathematics from Harvard College in 2001 and a doctorate in finance from the University of Chicago in 2008.

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Michael Weber

Associate Professor of Finance, University of Chicago Booth School of Business

Michael Weber is an associate professor of finance at the University of Chicago Booth School of Business. He is also a faculty research fellow at the National Bureau of Economic Research in the Monetary Economics and Asset Pricing groups, a research affiliate in the Monetary Economics and Fluctuations and the Financial Economics programs of CEPR, a member of the Monetary and the Macroeconomics Committees of the Verein fuer Socialpolitik, member of the Academic Advisory Committee of the Inflation: Drivers & Dynamics Research Program of the Central Bank Research Association, a research professor at Ifo Institute and a research affiliate at the CESifo Research Network. He is also academic consultant for the European Central Bank, the Federal Reserve Bank of Cleveland, the Bank of Finland, and several other central banks.

Weber’s research interests include asset pricing, macroeconomics, international finance, and household finance. His work on downside risk in currency markets and other asset classes earned the 2013 AQR Insight Award. He has published in leading general interest, economics, and finance journals such as the American Economic Review, Journal of Political Economy, the Review of Economic Studies, Proceedings of the National Academy of Sciences, Review of Financial Studies, and Journal of Financial Economics. RePEc currently ranks him at number one on its list of top young economists (those with first publications less than 10 years ago).

He holds an undergraduate degree in business economics from the University of Mannheim and a master’s degree and doctorate in finance from the University of California at Berkeley Haas School of Business.

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Chris Geczy

Adjunct Professor of Finance and Academic Director, Jacobs Levy Equity Management Center for Quantitative Financial Research, The Wharton School

Chris Geczy has been on the Finance Department faculty at the Wharton School since 1997. He is academic director of the Jacobs Levy Equity Management Center for Quantitative Financial Research and the Wharton Wealth Management Initiative at Wharton Executive Education. He previously worked for the Board of Governors of the Federal Reserve System, Washington, DC in its Division of Research and Statistics.

He currently serves on Intel’s U.S. Retirement Plans’ Investment Policy Committee, is a co-editor of Financial Planning Review, and formerly served on the Editorial Board of the Journal of Alternative Investments and the Economic Advisory Board of NASDAQ. His work has appeared in numerous books and scholarly journals including the Journal of Finance, Journal of Financial Economics, Journal of Portfolio Management, The Society for Industrial and Organizational Psychology and the Journal of Political Economy.

In 2018, Geczy and co-authors won the Investment for Impact Prize of the Center for Responsible Business at the University of California, Berkeley’s Haas School of Business for their research paper “Contracts With Benefits: The Implementation of Impact Investing.”

He has a bachelor’s degree in economics from the University of Pennsylvania and a doctorate in finance and econometrics from the Graduate School of Business at the University of Chicago.