Do REITs Hedge against Inflation? Evidence from an African Emerging Market

Daniel Ibrahim Dabara, Job Taiwo Gbadegesin, Abdul-Rasheed Amidu, Tunbosun Biodun Oyedokun and Augustina Chiwuzie

AfRES from African Real Estate Society (AfRES)

Abstract: Purpose: This study examines how returns on Nigerian REIT (N-REIT) behave in relation to inflation changes from 2008 to 2019 to provide information for investment decisions.Design/Methodology/Approach: Eleven years monthly return data from 2008 to 2019 were collected from databases and annual reports of the three active REITs in Nigeria. Inflation rates covering the study period were collected from the Central Bank of Nigeria’s database. The authors adopt the Fama and Schwert model, an extension of the Fisher hypothesis, to test N- REIT's inflation-hedging capability.Findings: The empirical results suggest that N-REIT has perverse hedging-characteristics (poor inflation hedges) across all inflation exposures (actual, expected, and unexpected). The Engle- Granger causality tests conducted corroborates these results.Practical Implication: This study reveals the peculiar nature of Nigerian REITs in relation to inflation, which could have profound investment implication for domestic and foreign investors.Originality/Value: This study is one of the first to empirically analyse the inflation-hedging characteristics of REITs in the second-largest African REIT market (N-REIT).

Keywords: emerging economies; Inflation-Hedge; Investment; real estate; Returns; risk. (search for similar items in EconPapers)
JEL-codes: R3 (search for similar items in EconPapers)
Date: 2021-09-01
New Economics Papers: this item is included in nep-cwa and nep-rmg
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