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.
| Original language | English |
|---|---|
| Journal | Journal of Real Estate Finance and Economics |
| Early online date | 16 Oct 2023 |
| DOIs | |
| Publication status | E-pub ahead of print - 16 Oct 2023 |
Bibliographical note
Acknowledgements: The authors thank the European Public Real Estate Association (EPRA) for funding. They alone are responsible for any errors.Funding: Open Access funding enabled and organized by Projekt DEAL
Data Availability Statement
The data that support the findings of this study are available upon request from the corresponding author.Keywords
- inflation hedging
- listed real estate companies
- Markov-switching
- VECM
- inflation-hedging portfolio