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Listed Real Estate as an Inflation Hedge Across Regimes

Author

Listed:
  • Jan Muckenhaupt

    (Technical University of Munich)

  • Martin Hoesli

    (Geneva Finance Research Institute and Swiss Finance Institute, University of Geneva
    University of Aberdeen Business School)

  • Bing Zhu

    (Technical University of Munich)

Abstract

This paper examines the inflation-hedging capability of listed real estate (LRE) companies in the US from 1975 to 2023, and in three other economies—the UK, Japan, and Australia—from 1990 to 2023. 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 turbulent periods. In stable periods, LRE provides good protection against inflation. In the long term, LRE offers a good hedge against expected inflation and shows a superior inflation hedging ability than stocks. Additionally, we identify 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, 2025. "Listed Real Estate as an Inflation Hedge Across Regimes," The Journal of Real Estate Finance and Economics, Springer, vol. 70(2), pages 189-239, February.
    • Handle: RePEc:kap:jrefec:v:70:y:2025:i:2:d:10.1007_s11146-023-09964-x
    DOI: 10.1007/s11146-023-09964-x
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    More about this item

    Keywords

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

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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