Scientific Beta

Felix Goltz in Advisor Perspectives: "Many advisors avoid allocating to inflation-protecting equities, fearing the age-old rule that protection comes at a price. However, my recent research with my colleagues Giovanni Bruno and Ben Luyten at Scientific Beta suggests this industry-wide fear is unfounded: Inflation-hedging stocks perform just as well as their inflation-sensitive peers."

Felix Goltz in Advisor Perspectives 29/09/2025

"(...) Many advisors avoid allocating to inflation-protecting equities, fearing the age-old rule that protection comes at a price. However, my recent research with my colleagues Giovanni Bruno and Ben Luyten at Scientific Beta suggests this industry-wide fear is unfounded: Inflation-hedging stocks perform just as well as their inflation-sensitive peers.

Does Protection Against Inflation Shocks Come at a Cost?

Recently, investment practice has shown growing interest in equity strategies that emphasize stocks with favorable sensitivity to inflation. A host of equity indices and exchange-traded funds promising inflation protection have been launched. For investors considering such strategies, a crucial question is whether such equity portfolios incur a cost in the form of lower expected returns.

In our detailed empirical analysis of this question, we go beyond headline inflation and analyze more granular components such as core, energy, or durable goods. Furthermore, instead of simply documenting the realized returns for portfolios that offer inflation protection, we provide an additional set of test results based on forward-looking cost of capital estimates, which are widely used in the accounting literature. Since realized returns contain noise specific to the historical sample, combining both sets of results can lead to more robust conclusions. (...)"