The Asymmetric Response of Equity REIT Returns to Inflation
This paper posits that the failure of past studies to document a positive relationship between REIT (Real Estate Investment Trust) returns and inflation is an artifact of the empirical framework that has predominated in these studies. Applying a pooled estimation methodology to an expansive data set containing 195 publicly traded equity REITs for the period 1981–2002, the study documents a strong asymmetry in the response of equity REIT returns to inflation. Specifically, when expected and unexpected inflation are separated into positive and negative changes, results indicate that equity REIT returns rise in response to both increases and decreases in inflation. The evidence, which is partly contingent on the prevailing monetary policy environment, carries important policy implications for portfolio management and provides insights into the observed anomalous relationship between REITs and inflation. Copyright Springer Science+Business Media, LLC 2007
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Goodfriend, Marvin, 1991.
"Interest rates and the conduct of monetary policy,"
Carnegie-Rochester Conference Series on Public Policy,
Elsevier, vol. 34(1), pages 7-30, January.
- K.C. Chan & Patric H. Hendershott & Anthony B. Sanders, 1990.
"Risk and Return on Real Estate: Evidence from Equity REITs,"
NBER Working Papers
3311, National Bureau of Economic Research, Inc.
- K. C. Chan & Patric H. Hendershott & Anthony B. Sanders, 1990. "Risk and Return on Real Estate: Evidence from Equity REITs," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 18(4), pages 431-452.
- Cook, Timothy & Hahn, Thomas, 1988. "The Information Content of Discount Rate Announcements and Their Effect on Market Interest Rates," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 20(2), pages 167-80, May.
- Andersen, Torben G. & Bollerslev, Tim & Diebold, Francis X. & Vega, Clara, 2004.
"Real-time price discovery in stock, bond and foreign exchange markets,"
CFS Working Paper Series
2004/19, Center for Financial Studies (CFS).
- Torben G. Andersen & Tim Bollerslev & Francis X. Diebold & Clara Vega, 2003. "Real-Time Price Discovery in Stock, Bond and Foreign Exchange Markets," PIER Working Paper Archive 04-028, Penn Institute for Economic Research, Department of Economics, University of Pennsylvania, revised 28 Jun 2004.
- Torben G. Andersen & Tim Bollerslev & Francis X. Diebold & Clara Vega, 2005. "Real-Time Price Discovery in Stock, Bond and Foreign Exchange Markets," NBER Working Papers 11312, National Bureau of Economic Research, Inc.
- Dallas S. Batten & Daniel L. Thornton, 1983.
"Discount rate changes and the foreign exchange market,"
1983-016, Federal Reserve Bank of St. Louis.
- Batten, Dallas S. & Thornton, Daniel L., 1984. "Discount rate changes and the foreign exchange market," Journal of International Money and Finance, Elsevier, vol. 3(3), pages 279-292, December.
- Hakkio, Craig S. & Pearce, Douglas K., 1992. "Discount rate policy under alternative operating procedures: An empirical investigation," International Review of Economics & Finance, Elsevier, vol. 1(1), pages 55-72.
- Glascock, John L & Lu, Chiuling & So, Raymond W, 2002. "REIT Returns and Inflation: Perverse or Reverse Causality Effects?," The Journal of Real Estate Finance and Economics, Springer, vol. 24(3), pages 301-17, May.
- Alvaro Almeida & Richard Payne & Charles Goodhart, 1997.
"The Effects of Macroeconomic News on High Frequency Exchange Rate Behaviour,"
FMG Discussion Papers
dp258, Financial Markets Group.
- Almeida, Alvaro & Goodhart, Charles & Payne, Richard, 1998. "The Effects of Macroeconomic News on High Frequency Exchange Rate Behavior," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 33(03), pages 383-408, September.
- Madura, Jeff & Schnusenberg, Oliver, 2000. "Effect of Federal Reserve Policies on Bank Equity Returns," Journal of Financial Research, Southern Finance Association;Southwestern Finance Association, vol. 23(4), pages 421-47, Winter.
- Ewing, Bradley T. & Payne, James E., 2005. "The response of real estate investment trust returns to macroeconomic shocks," Journal of Business Research, Elsevier, vol. 58(3), pages 293-300, March.
- Fama, Eugene F. & Schwert, G. William, 1977. "Asset returns and inflation," Journal of Financial Economics, Elsevier, vol. 5(2), pages 115-146, November.
- White, Halbert, 1980. "A Heteroskedasticity-Consistent Covariance Matrix Estimator and a Direct Test for Heteroskedasticity," Econometrica, Econometric Society, vol. 48(4), pages 817-38, May.
- Balduzzi, Pierluigi & Elton, Edwin J. & Green, T. Clifton, 2001. "Economic News and Bond Prices: Evidence from the U.S. Treasury Market," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 36(04), pages 523-543, December.
- Moulton, Brent R, 1987. "Diagnostics for Group Effects in Regression Analysis," Journal of Business & Economic Statistics, American Statistical Association, vol. 5(2), pages 275-82, April.
- David Hartzell & John S. Hekman & Mike E. Miles, 1987. "Real Estate Returns and Inflation," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 15(1), pages 617-637.
- Roger G. Ibbotson & Laurence B. Siegel, 1984. "Real Estate Returns: A Comparison with Other Investments," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 12(3), pages 219-242.
- W. B. Brueggeman & A. H. Chen & T. G. Thihodeau, 1984. "Real Estate Investment Funds: Performance and Portfolio Considerations," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 12(3), pages 333-354.
- Moulton, Brent R., 1986. "Random group effects and the precision of regression estimates," Journal of Econometrics, Elsevier, vol. 32(3), pages 385-397, August.
When requesting a correction, please mention this item's handle: RePEc:kap:jrefec:v:34:y:2007:i:4:p:513-529. 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: (Guenther Eichhorn)or (Christopher F. Baum)
If references are entirely missing, you can add them using this form.