The short term inflation hedging characteristics of UK real estate

Bryan Duncan MacGregor, Martin Edward Ralph Hoesli, Nanda Nanthakumaran

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31 Citations (Scopus)


This study investigates the short-term in¯ation-hedging characteristics of U.K. real estate compared to other U.K. investments. It considers not only total returns but also changes in income and changes in capital values. The analyses are undertaken using annual and quarterly data. Stocks, bonds, appraisal-based real estate (including the three property types, separately), and real estate stocks are considered. Real estate series, constructed from the original appraisal series to take account of autocorrelation, also are used. The methodology is based on that devised by Fama and Schwert (1977) and tests are undertaken for stationarity and structural breaks. Hypotheses are established about the coef®cients on expected and unexpected in¯ation in the model, and these are tested. It is concluded that real estate has poorer short-term hedging characteristics for total return, change in capital value, and change in income than stocks but better characteristics than bonds. However, there is evidence to suggest that the relationships change under different economic environments.
Original languageEnglish
Pages (from-to)27-57
Number of pages31
JournalThe Journal of Real Estate Finance and Economics
Issue number1
Publication statusPublished - 1997


  • inflation-hedging
  • expected inflation
  • unexpected inflation
  • United Kingdom


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