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Is Real Estate Really an Inflation Hedge? Evidence from Taiwan

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  • Wen‐Shwo Fang
  • Kuan‐Min Wang
  • Thanh‐Binh T. Nguyen

Abstract

This study examines whether Taiwan's housing returns hedge against expected and unexpected inflation. In other words, how well does the rise in housing returns compensate for the costs added as a result of the shrink in wealth and purchasing power? Within the exponential generalized autoregressive conditional heteroskedasticity in mean model framework, we further explore the impact of conditional hetero‐risk on housing return and the influence of asymmetric information on conditional risk. Over the period from 1991 to 2006, the empirical results reveal negative relationships between housing returns and expected as well as unexpected inflation, proving the ineffective inflation hedge of Taiwan's housing investment. The determinant of this phenomenon is the leverage shock between ‘good news’ and ‘bad news’.

Suggested Citation

  • Wen‐Shwo Fang & Kuan‐Min Wang & Thanh‐Binh T. Nguyen, 2008. "Is Real Estate Really an Inflation Hedge? Evidence from Taiwan," Asian Economic Journal, East Asian Economic Association, vol. 22(2), pages 209-224, June.
    • Handle: RePEc:bla:asiaec:v:22:y:2008:i:2:p:209-224
    DOI: 10.1111/j.1467-8381.2008.00275.x
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    2. Taderera, Marimo & Akinsomi, Omokolade, 2020. "Is commercial real estate a good hedge against inflation? Evidence from South Africa," Research in International Business and Finance, Elsevier, vol. 51(C).
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    5. Aqsha, Nur Suhairah & Masih, Mansur, 2018. "Is residential property the ultimate hedge against inflation ? new evidence from Malaysia based on ARDL and nonlinear ARDL," MPRA Paper 91508, University Library of Munich, Germany.

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