The Fed Model, in its most basic form, states that stocks are undervalued when their earnings yield is less than the yield on a 10-year Treasury note. Asness notes that since the Treasury yield is a nominal number, whereas the earnings yield is a real number, it is erroneous to compare the two. He points out that when the Treasury yield rises due to inflation, both the numerator and denominator in the earnings yield (E/P) should rise equally. Hence, there is no reason for the earnings yield to change in response to inflation. Indeed, if the earnings yield were expected to rise in response to inflation this would defeat the logic of buying stocks as a hedge against inflation.