Work

Listed Real Estate as an Inflation Hedge Across Regimes

Year: 2023

Type: article

Abstract: This paper examines the inflation-hedging capability of listed real estate (LRE) companies in the US from 1975 to 2023, and in three other economies—the UK, Japan, and Australia—from 1990 to 2023. By using a Markov switching vector error correction model (MS-VECM), we identify that the short-term hedging ability moves towards being negative or zero during turbulent periods. In stable periods, LRE provides good protection against inflation. In the long term, LRE offers a good hedge against expected inflation and shows a superior inflation hedging ability than stocks. Additionally, we identify inflation-hedging portfolios by minimizing the expected shortfall. This inflation-hedging portfolio allocation methodology suggests that listed real estate stocks should play a significant role in investor portfolios.

Source: The Journal of Real Estate Finance and Economics

DOI: 10.1007/s11146-023-09964-x

Authors: Jan Muckenhaupt, Martin Hoesli, Bing Zhu

Institutions: Technical University of Munich, University of Geneva, University of Aberdeen, Geneva Finance Research Institute, Swiss Finance Institute

Language: English

Topic: Financial Markets and Investment Strategies

Subfield: Finance

Field: Economics, Econometrics and Finance

Domain: Social Sciences

Open Access status: hybrid

Estimated APC paid: $2,990

Funder: Technische Universität München