Optimized Portfolios, Hedge, and Inflation: The Case of Turkey

This thesis unfolds in three successive phases, considering the pivotal role of inflation in investors' decisions, particularly in the Turkish economic landscape. The first phase examines the hedging potential of several asset classes, namely gold, foreign currencies, real estate, and the stock market, in light of escalating inflation rates in Turkey. Following the identification of viable hedging instruments, optimized portfolios are formed in the second phase using Sharpe ratio and CVaR optimization techniques. In the final phase, the interaction between the realized returns of these optimized portfolios and the Economic Confidence Index (ECI) is examined. Different quantiles of conditional distributions, as well as time domain and frequency domain are considered. Methods such as quantile correlation, dynamic conditional correlation and wavelet coherence are applied. This comprehensive study not only contributes to the existing body of knowledge through its unique methodology, structure, and variable selection, but also offers practical insights for investors at times when large shocks to the economy are expected. Keywords: ECI, Inflation Hedging, Optimized Portfolios, CVaR