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Unexpected Inflation, Capital Structure And Real Risk-Adjusted Firm Performance, Jamie Alcock, Eva Steiner
Unexpected Inflation, Capital Structure And Real Risk-Adjusted Firm Performance, Jamie Alcock, Eva Steiner
Eva Steiner
Managers can improve real risk-adjusted #12;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 #12;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 …