Can housing investment hedge against inflation?

Abstract

Purpose This paper aims to test the hedging ability of housing investment against inflation in Japan and the USA during the period 2000–2020. Design/methodology/approach This study applies the deep learning method and The exponential general autoregressive conditional heteroskedasticity in mean (1, 1) model with breaks. Findings Within the asymmetric framework, it is found that housing returns (HR) can hedge against inflation in both these markets, which mentions that when investing in the housing market in Japan and the USA, investors are compensated for bearing from inflation. This result is consistent with Fisher’s hypothesis. Especially, the empirical results show that the risk-return tradeoff is available in Japan’s housing market and not available in the US housing market. Any signal of a high inflation rate – referred to as “bad news” – may cause a drop in HR in Japan and a raise in the USA. Originality/value To the best of the author’s knowledge, this is one of the first studies using the deep learning method (long short-term memory model) to estimate the expected/unexpected inflation rates.

The Potential of Residential Property in Poland as an Inflation Hedge Investment

“…Using a quantile cointegration analysis, they showed that, during 1953 -2016, house prices in the USA acted as an inflation hedge when the former was relatively lower and the latter was comparatively higher. Nguyen (2023), based on the housing index for Japan and the USA from 2000 to 2020, showed that housing investments hedged against inflation in these countries.…”

“…One crucial issue is the importance of the investment horizon in hedging capital against inflation. Studies consider the long-term and short-term as a standard (Nguyen, 2023). Most studies have found the hedging ability of housing markets in the long term but not in the short term.…”