Inflation Risk Perception and Investment Decisions: Evidence from a Survey of Individual Investors

Inflation risk perception is the strongest predictor of how much of a portfolio is held in inflation-hedging assets, financial literacy adds explanatory power, and allocation differs by income group. The model explains about half of the variation in allocation. Limitations to address in the final version: 1.                Data are simulated placeholders. Real survey data may produce different estimates; every number in Section 4 must be refreshed. 2.                Cross-sectional design. The results show association, not causation; perceptions may also follow from holdings. 3.                Self-reported allocations may be inaccurate, and the sample may not represent all investors. 4.                Model checks. Report residual plots, normality, equal variances (Levene's test for ANOVA), multicollinearity (VIF) and a post-hoc test before drawing firm conclusions. 5.                Hedge assets are grouped together. Equities, gold and real estate hedge inflation differently, so separate models by asset class would be informative. Future research could use panel data, add actual inflation rates, and compare periods of high and low inflation.

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