Evaluation of the Resilience of Real Estate and Property Stocks to Inflation and Interest Rate Uncertainty: Implementation of Two Asset Pricing Models

Nurdina Nurdina (), Nurkholis Nurkholis, Noval Adib and Sari Atmini
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Nurdina Nurdina: Department of Accounting, Faculty of Economics and Business, Universitas Brawijaya, Malang 65145, Indonesia
Nurkholis Nurkholis: Department of Accounting, Faculty of Economics and Business, Universitas Brawijaya, Malang 65145, Indonesia
Noval Adib: Department of Accounting, Faculty of Economics and Business, Universitas Brawijaya, Malang 65145, Indonesia
Sari Atmini: Department of Accounting, Faculty of Economics and Business, Universitas Brawijaya, Malang 65145, Indonesia

JRFM, 2024, vol. 17, issue 12, 1-18

Abstract: Property stocks are an attractive alternative investment for investors who want passive income. Investors’ decisions focus not only on maximizing returns but also on reducing risk. This study examines the extent to which macroeconomic factors affect stock performance by comparing the effectiveness of the Fama–French five-factor model (5FF) and Fama–French seven-factor model (7FF) in estimating returns. This study also verifies Fisher’s theory in the context of property and real estate stocks. The research data used are property and real estate stocks in the Indonesian capital market. The data are processed using the OLS estimation method, and Akaike’s Information Criterion (AIC) is used to choose the optimal model. The results show that property and real estate stocks in Indonesia with negative profitability at all quantiles can hedge inflation and interest rates. However, the interest rates are not the only factor affecting the market risk. The 7FF model is better at explaining the variability of stock portfolio returns. This research makes an essential contribution to the financial literature in Indonesia, particularly in the context of portfolio management in the property and real estate sector.

Keywords: property and real estate stocks; stock returns; Fama–French five-factor model; Fama–French seven-factor model; Indonesian capital market (search for similar items in EconPapers)
JEL-codes: C E F2 F3 G (search for similar items in EconPapers)
Date: 2024
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