IDEAS home Printed from
   My bibliography  Save this article

The long-term inflation hedging effectiveness of real estate and financial assets: A New Zealand investigation


  • Abeyratna Gunasekarage
  • David M. Power
  • Ting Ting Zhou


Purpose - The purpose of this paper is to examine the long-term relationship between the rate of inflation and the returns of real estate and financial assets traded in New Zealand markets. Design/methodology/approach - The question of whether these assets are good candidates to hedge inflation in the long run is addressed employing cointegration and causality tests on quarterly data for the period from December 1979 to December 2003. Findings - A strong long-term relationship was found between the returns offered by all types of real estate assets (i.e. residential, commercial, industrial and farm building) and the rate of inflation. However, such a long run relationship is not detected between the rate of inflation and the returns of financial assets (i.e. stocks, short-term bills and long-term bonds). Research limitations/implications - The empirical findings reveal that the direction of causality is from inflation to real estate assets indicating that changes in property prices do not cause inflation in New Zealand; the cause of inflation is independent of the price movements for real estate assets. The real estate assets are found to offer an effective hedge against inflation in the long run. The same cannot be said for the financial assets, however. Originality/value - This is the first New Zealand study which investigates the long-term inflation hedging effectiveness of both real estate and financial assets. The findings should be of interest to most of the investors in New Zealand as the real estate assets play a significant role in their portfolio decisions.

Suggested Citation

  • Abeyratna Gunasekarage & David M. Power & Ting Ting Zhou, 2008. "The long-term inflation hedging effectiveness of real estate and financial assets: A New Zealand investigation," Studies in Economics and Finance, Emerald Group Publishing, vol. 25(4), pages 267-278, October.
  • Handle: RePEc:eme:sefpps:v:25:y:2008:i:4:p:267-278

    Download full text from publisher

    File URL:
    Download Restriction: Access to full text is restricted to subscribers

    As the access to this document is restricted, you may want to search for a different version of it.


    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eme:sefpps:v:25:y:2008:i:4:p:267-278. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Virginia Chapman). General contact details of provider: .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.