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The Inflation-Hedging Effectiveness of Real Estate

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    Abstract

    Inflation has become one of the predominant financial concerns of the late twentieth century. In the late 1970s, public opinion polls ranked inflation as the number one problem in the United States. While the rate of inflation has slowed since the late 1970s, inflation is still present and many investors expect a resurgence of inflation to higher levels in the near to immediate future. This continued concern about inflation has led to an increased search and evaluation of investments that will protect investors from inflation. Assets that have the ability to protect investors from the effects of inflation are generally labeled inflation hedges. Real estate has been regarded as one of the best inflation hedges of past years. While there has been research in the past evaluating this possibility and some recent research using only business real estate, no current research on residential real estate or farmland as inflation hedges exists. This study examines the inflation-hedging effectiveness of residential real estate, farmland, and business real estate (with a different data set) as individual assets and in a portfolio context for 1960-86.

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    File URL: http://aux.zicklin.baruch.cuny.edu/jrer/papers/pdf/past/vol04n02/v04p045.pdf
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    Bibliographic Info

    Article provided by American Real Estate Society in its journal Journal of Real Estate Research.

    Volume (Year): 4 (1989)
    Issue (Month): 2 ()
    Pages: 45-56

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    Handle: RePEc:jre:issued:v:4:n:2:1989:p:45-56

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    Postal: American Real Estate Society Clemson University School of Business & Behavioral Science Department of Finance 401 Sirrine Hall Clemson, SC 29634-1323
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    Web page: http://www.aresnet.org/

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    Postal: Diane Quarles American Real Estate Society Manager of Member Services Clemson University Box 341323 Clemson, SC 29634-1323
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    Web: http://aux.zicklin.baruch.cuny.edu/jrer/about/get.htm

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    1. Carlson, John A & Parkin, J Michael, 1975. "Inflation Expectations," Economica, London School of Economics and Political Science, vol. 42(166), pages 123-38, May.
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    Cited by:
    1. Fatnassi, Ibrahim & Slim, Chaouachi & Ftiti, Zied & Ben Maatoug, Abderrazek, 2014. "Effects of monetary policy on the REIT returns: Evidence from the United Kingdom," Research in International Business and Finance, Elsevier, vol. 32(C), pages 15-26.
    2. Tan, Teck Hong & Khong, Kok Wei, 2012. "The Link between Homeownership Motivation and Housing Satisfaction," MPRA Paper 46890, University Library of Munich, Germany.
    3. Elizabeth Yobaccio & Jack H. Rubens & David C. Ketcham, 1995. "The Inflation-Hedging Properties of Risk Assets: The Case of REITs," Journal of Real Estate Research, American Real Estate Society, vol. 10(3), pages 279-296.
    4. Michael T. Bond & Michael J. Seiler, 1998. "Real Estate Returns and Inflation: An Added Variable Approach," Journal of Real Estate Research, American Real Estate Society, vol. 15(3), pages 327-338.
    5. Tsong-Yue Lai & Hin Man Mak & Ko Wang, 2001. "Asset Pricing Model with Short-Sale Restrictions: The Case of Asian Property Markets," International Real Estate Review, Asian Real Estate Society, vol. 4(1), pages 43-56.
    6. James R. Webb & K.W. Chau & L.H. Li, 1997. "Past and Future Sources of Real Estate Returns in Hong Kong," Journal of Real Estate Research, American Real Estate Society, vol. 13(3), pages 251-272.
    7. I-Chun Tsai & Cheng-Feng Lee & Ming-Chu Chiang, 2012. "The Asymmetric Wealth Effect in the US Housing and Stock Markets: Evidence from the Threshold Cointegration Model," The Journal of Real Estate Finance and Economics, Springer, vol. 45(4), pages 1005-1020, November.

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