Listed Real Estate as an Inflation Hedge Across Regimes

Jan Muckenhaupt (), Martin Hoesli () and Bing Zhu ()
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Jan Muckenhaupt: Technical University of Munich
Martin Hoesli: Geneva Finance Research Institute and Swiss Finance Institute, University of Geneva
Bing Zhu: Technical University of Munich

The Journal of Real Estate Finance and Economics, 2025, vol. 70, issue 2, No 1, 189-239

Abstract: Abstract This paper examines the inflation-hedging capability of listed real estate (LRE) companies in the US from 1975 to 2023, and in three other economies—the UK, Japan, and Australia—from 1990 to 2023. 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 turbulent periods. In stable 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)
Date: 2025
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DOI: 10.1007/s11146-023-09964-x

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