Listed Real Estate as an Inflation Hedge across Regimes

Jan Muckenhaupt, Martin Hoesli and Bing Zhu
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Jan Muckenhaupt: Technische Universität München (TUM)
Martin Hoesli: University of Geneva - Geneva School of Economics and Management (GSEM); Swiss Finance Institute; University of Aberdeen - Business School
Bing Zhu: Technische Universität München (TUM)

No 23-13, Swiss Finance Institute Research Paper Series from Swiss Finance Institute

Abstract: This paper investigates the inflation hedging capability of listed real estate (LRE) companies from 1990 to 2021 in four economies: the US, the UK, Australia, and Japan. 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 crisis periods. In non-crisis 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.

Keywords: Inflation Hedging; Listed Real Estate Companies; Markov-Switching; VECM; Inflation-Hedging Portfolio (search for similar items in EconPapers)
JEL-codes: G11 G15 (search for similar items in EconPapers)
Pages: 56 pages
Date: 2023-02
New Economics Papers: this item is included in nep-ure
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:chf:rpseri:rp2313

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