The Inflation-Hedging Properties of Risk Assets: The Case of REITs

Elizabeth Yobaccio (), Jack H. Rubens and David C. Ketcham ()
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Elizabeth Yobaccio: Department of Finance and Economics Bryant College 1150 Douglas Pike Smithfield, Rhode Island 02917, http://www.bryant.edu/
Jack H. Rubens: Deceased formerly Chairmand and Associate Professor of Finance Bryant College Smithfield, Rhode Island 02917, http://www.bryant.edu/
David C. Ketcham: Department of Finance and Economics Bryant College 1150 Douglas Pike Smithfield, Rhode Island 02917 Rouston, Louisiana 71272, http://www.bryant.edu/

Journal of Real Estate Research, 1995, vol. 10, issue 3, pages 279-296

Abstract: This study examines the inflation-hedging abilities of REITs over the period 1972:2-1992:12 to determine whether REITs act as a hedge against expected and/or unexpected inflation. The time period used in this study is substantially longer than in earlier studies. A model of real estate returns is derived that has components for expected and unexpected returns and allows for variation in the real return on risky assets. The results indicate that REITs provide some hedging capability against expected inflation, but act as perverse hedges against unexpected inflation. These results are robust with respect to time period studied, measure of expected inflation and proxy for the market portfolio, indicating that the apparent perverse hedging property of real estate investments is not due to methodological problems.

JEL-codes: L85 (search for similar items in EconPapers)
Date: 1995
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