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Did TIPS predict rising inflation in the first semester of 2022?
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Orientador(es)
Resumo(s)
The main goal of this study is to investigate whether Treasury inflation-protected securities (TIPS) predicted the observed inflation increase in the first half of 2022. As the breakeven inflation rate is the sum of inflation expectations plus the inflation risk premium minus a liquidity premium that investors demand to hold comparatively less liquid TIPS securities, the calculation of the liquidity premium for TIPS becomes imperative to assess whether they foresaw the inflation increase.
To compute the TIPS liquidity premium, three proxies of liquidity measures are considered: the TIPS Bid-Ask Spread, the Refcorp Spread and the TIPS Relative Trading Volume. With the aim to identify which liquidity measures best explain the movement of the breakeven inflation, a series of simple and multiple linear regressions are made. The combination of TIPS Relative Trading Volume and the Refcorp Spread stands out as the most effective liquidity measures in estimating fluctuations in the breakeven inflation rate.
Descrição
Dissertation presented as the partial requirement for obtaining a Master's degree in Statistics and Information Management, specialization in Risk Analysis and Management
Palavras-chave
TIPS Breakeven Inflation Rate Inflation Liquidity Premium Linear Regression SDG 8 - Decent work and economic growth