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Listed Real Estate as an Inflation Hedge across Regimes

Author

Listed:
  • Jan Muckenhaupt
  • Martin Hoesli
  • Bing Zhu

Abstract

This paper investigates the inflation hedging capability of listed real estate (LRE) companies from 1990 to 2021 in four economies: the US, the UK, Australia, and Japan. 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 crisis periods. In non-crisis periods, LRE provides good protection against inflation. In the long term, LRE provides a good hedge against expected inflation, and shows a superior inflation hedging ability than stocks. Additionally, we propose 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.

Suggested Citation

  • Jan Muckenhaupt & Martin Hoesli & Bing Zhu, 2023. "Listed Real Estate as an Inflation Hedge across Regimes," ERES eres2023_56, European Real Estate Society (ERES).
    • Handle: RePEc:arz:wpaper:eres2023_56
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    More about this item

    Keywords

    Inflation Hedging; Inflation-Hedging Portfolio; Listed Real Estate Companies; Markov-switching;
    All these keywords.

    JEL classification:

    • R3 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location

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