Does Inflation Illusion Explain the Relation between REITs and Inflation?

Gwangheon Hong () and Bong Lee ()

The Journal of Real Estate Finance and Economics, 2013, vol. 47, issue 1, 123-151

Abstract: We examine whether the observed negative relations between real estate investment trust (REIT) returns and inflation can be explained by the inflation illusion. We identify the mispricing component in REIT prices based on present value models, both linear and loglinear, and then we investigate whether inflation can explain the mispricing component. When we allow for time-varying interest rates, inflation no longer explains the REIT mispricing component. Instead, we find that behavioral factors such as consumer sentiments contribute to the mispricing of REIT prices. Copyright Springer Science+Business Media, LLC 2013

Keywords: REIT returns; Inflation hedge; Mispricing; G12; R31; E44; C32 (search for similar items in EconPapers)
Date: 2013
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Citations: View citations in EconPapers (7)

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DOI: 10.1007/s11146-011-9353-9

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