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Listed Real Estate as an Inflation Hedge across Regimes

Author

Listed:
  • Jan Muckenhaupt

    (Technische Universität München (TUM))

  • Martin Hoesli

    (University of Geneva - Geneva School of Economics and Management (GSEM); Swiss Finance Institute; University of Aberdeen - Business School)

  • Bing Zhu

    (Technische Universität München (TUM))

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 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, 2023. "Listed Real Estate as an Inflation Hedge across Regimes," Swiss Finance Institute Research Paper Series 23-13, Swiss Finance Institute.
    • Handle: RePEc:chf:rpseri:rp2313
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    File URL: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4362134
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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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