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Does REIT index hedge inflation risk? New evidence from the tail quantile dependences of the Markov-switching GRG copula

Kuang-Liang Chang

The North American Journal of Economics and Finance, 2017, vol. 39, issue C, 56-67

Abstract: This paper explores tail quantile dependences between the inflation rate and the real estate investment trust (REIT) return by utilizing the Markov-switching GRG copula. Empirical results show that the dependence between inflation rate and REIT return is mixed, implying that the inflation-hedging ability of REIT index is not fixed. The REIT index is not a hedge against inflation risk during the period of negative dependence; on the contrary, the REIT index has a partially inflation hedging ability during the period of positive dependence. Furthermore, the intensity for the dependence in non-extreme cases is different from that in very extreme cases.

Keywords: Inflation rate; REIT return; Tail dependence; Inflation hedge ability; Markov-switching copula (search for similar items in EconPapers)
JEL-codes: C32 C51 E31 G15 (search for similar items in EconPapers)
Date: 2017
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Handle: RePEc:eee:ecofin:v:39:y:2017:i:c:p:56-67