purchasing power risk

Purchasing power risk

purchasing power risk

The risk that unexpected changes in consumer prices will penalize an investor's real return from holding an investment. Because investments from gold to bonds and stock are priced to include expected inflation rates, it is the unexpected changes that produce this risk. Fixed income securities, such as bonds and preferred stock, subject investors to the greatest amount of purchasing power risk since their payments are set at the time of issue and remain unchanged regardless of the inflation rate.
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References in periodicals archive ?
Probably more damaging is purchasing power risk, the risk that inflation will erode your ability to afford the things you will need.
Every investment has some risk, even if it is only purchasing power risk.
Finally, controlling risk, as mentioned earlier, also includes controlling purchasing power risk.
Stulz (1984) expands the literature on exchange rate determinants by investigating the effect of purchasing power risks on exchange rates.

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