Abstract
In this article we have attempted to determine various assets that could provide a possible hedge against inflation. The data for the period 1980-81 to 2000-01 used in the study is collected from RBI website namely rbi.org.in and the Handbook of Statistics on Indian economy. The returns on seven assets were considered. The wholesale price index is used to compute inflation rate. The results indicate that gold is an over hedge against total inflation as well as on the expected and unexpected inflation. Silver is an over hedge against only expected inflation. The BSE sensex index is an over hedge against total as well as the expected inflation when the return on asset versus the inflation rate measure was used as computed on a continuously compounded basis.
None of the remaining assets are hedges against inflation. The study concludes with suggestion for future research.
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