The Inflation-Hedging Properties of Risk Assets: The Case of REITs

Yobaccio, Elizabeth; Rubens, Jack H.; Ketcham, David C.

doi:10.1080/10835547.1995.12090792

Cited by 38 publications

(18 citation statements)

References 17 publications

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“…Various studies show that returns in the USA and most other countries are either unrelated to inflation or even provide a perverse hedge against it (Fama and Schwert, 1977;Geske and Roll, 1983;Liu et al, 1997;among others). Most studies scrutinizing REITs find these or similar results for both expected and unexpected inflation (Murphy and Kleiman, 1989;Chan et al, 1990;Park and Mullineaux, 1990;Yobaccio et al, 1995;Chatrath and Liang, 1998;Adrangi et al, 2004). Only Gyourko and Linneman (1988) state that REITs provide JPIF 30,3 a hedge against expected inflation.…”

Section: Literature Reviewmentioning

confidence: 90%

“…The original FS framework implies that the expected real return is influenced by real economic activity, but not by the (expected) rate of inflation. In contrast, subsequent researchers argue that investors may become more risk averse in times of high inflation or disinflation and expect higher real returns on assets (Yobaccio et al, 1995). Following this argument, real asset returns and the expected rate of inflation are -in contrast to the FS model -not unrelated.…”

Section: Methodsmentioning

confidence: 99%

“…Ex post inflation rates are used as inflation predictors, following an ARIMA time series model. Moreover, they add a CAPMUI model (Yobaccio et al, 1995) to investigate the proposition that expected real returns and the expected rate of inflation are not unrelated. As a result, they state that German OEF provide a significant hedge against expected inflation but not against unexpected inflation while German RES do neither.…”

Section: Literature Reviewmentioning

confidence: 99%

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Inflation‐hedging properties of indirect real estate investments in Germany

Obereiner

Kurzrock

2012

Journal of Property Investment &Amp; Finance

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Purpose -This paper seeks to shed light on the question whether German real estate investment vehicles provide an effective hedge against inflation. To do so it aims to investigate open-end real estate funds, special funds and real estate stocks. Design/methodology/approach -Traditional approaches as well as cointegration and causality tests are applied to monthly and quarterly index data from 1992:04 to 2009:12 for the subject investment vehicles. Findings -There is strong evidence that real estate returns are almost independent from inflation in the short run. None of the investigated investment vehicles provide a hedge against expected and unexpected inflation at different lags. In contrast, cointegration tests show that real estate stocks, open-end funds and special funds do provide a hedge against inflation in the long term. Likewise, causality tests suggest that real estate performance is influenced by inflation in the long term.Research limitations/implications -The study still could not investigate closed-end funds and G-REITs. Yet, it does capture the most and comprehensive part of the indirect German real estate investment market. Practical implications -Inflation-hedging capabilities are of particular interest in periods of economic instability. Especially institutional investors with large asset portfolios seek to adjust their asset allocation to changing conditions. Originality/value -To date, research papers on the subject of inflation-hedging capabilities of real estate almost exclusively focus on REITs in the USA and in the UK. Research about the German real estate market and alternative investment vehicles is rare -partly due to a lack of transparency over the past -although international investors more and more adhere to the German real estate investment market.

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Section: Literature Reviewmentioning

confidence: 90%

Section: Methodsmentioning

confidence: 99%

Section: Literature Reviewmentioning

confidence: 99%

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Inflation‐hedging properties of indirect real estate investments in Germany

Obereiner

Kurzrock

2012

Journal of Property Investment &Amp; Finance

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“…In the studies looking at the US REIT market, it was indicated that the macroeconomic variables previously used are interest rates (Chen and Tzang, 1988;McCue and Kling, 1994;Allen et al, 2000), inflation (Chen and Tzang, 1988;Park et al, 1990;Yobaccio et al, 1995;Chan et al, 1990;Chatrath and Liang, 1998;McCue and Kling, 1994;Jirasakuldech and Emekter, 2012;Ewing and Payne, 2005;Liu et al, 2012;Glascock et al, 2002;Simpson et al, 2007;Yunus, 2012), industrial production (McCue and Kling, 1994), GDP (Ewing and Payne, 2005;Li and Lei, 2011;Chang et al, 2011;Yunus, 2012), and money supply (Chang et al, 2011;Jirasakuldech and Emekter, 2012;Ewing and Payne, 2005;Bredin et al, 2007Bredin et al, , 2011Anderson et al, 2012;Yunus, 2012). In contrast, studies looking at the property stock markets employed macroeconomic variables encompassing interest rate (Liow and Yang, 2005;Stevenson et al, 2007), inflation (Liow and Yang, 2005;Yunus, 2012;Lee et al, 2011), industrial production (Lee et al, 2011), GDP (Liow and Yang, 2005;Yunus, 2012), and money supply (Liow and Yang, 2005;Yunus, 2012;Lee et al, 2011;Xu and Yang, 2011).…”

Section: Literature Reviewmentioning

confidence: 99%

Integration between the Asian REIT markets and macroeconomic variables

Loo

Anuar

Ramakrishnan

2016

Journal of Property Investment &Amp; Finance

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Purpose – The purpose of this paper is to examine the long-run relationship and short-term linkage between the Asian REIT markets and their respective macroeconomic variables. Design/methodology/approach – The data collected comprised total return REIT Index from Japan, Hong Kong, Singapore, Malaysia, Thailand, Taiwan and South Korea and their macroeconomic variables from the date of availability of the data until December 2014. The macroeconomic variables are either available in monthly or quarterly basis, they will be separately tested with REIT Index respectively to their frequency. All the variables are tested for its stationarity prior to the investigation of their long-run relationship and short-term linkage using Johansen cointegration test and Granger causality test. Findings – The results showed that certain of the emerging REIT markets show a higher degree of integration with macroeconomic variables in the long run. This implies that the emerging REIT markets are more sensitive towards the change in macroeconomic environment in relative to the developed REIT markets. Practical implications – The paper implied that the distinction of each market structure and their unique way of policy implementation. The findings can assists policy makers to understand about the significance of policy implementation on the Asian REIT markets prior to decision making and also for the portfolio management my asset managers. Originality/value – The paper is one of the few attempts at assessing the long-term relationship and short term linkage between the Asian REIT markets and the macroeconomic variables.

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“…Real estate investment trusts (REITs) usually serve as a proxy of the securitized real estate. In general, they are reported to behave like common stocks and be insignificantly or negatively correlated with inflation (Ewing and Payne 2005;Lu and So 2004;Liu and Hartzell 1997;Yobaccio, Ketcham, and Ketcham 1995;Park, Mullineaux, and Chew 1990;Titman and Warga 1989;Gyourko and Linneman 1988). Simpson, Ramchander, and Webb (2007), in contrast, document a positive relationship between REIT returns and the inflation rate.…”

Section: Introductionmentioning

confidence: 92%

International Real Estate Review

Liu¹,

Zhou²

2009

IRER

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This paper examines the inflation-hedging behavior of the Hong Kong securitized real estate market between April 1986 and April 2007. The monthly series of the Hang Seng Property Index (HSPI) is selected as the proxy of the Hong Kong securitized real estate market due to its comprehensive coverage and availability of rich data. We find that the vector autoregressive forecast error method, which is introduced by Den Haan (2000), outperforms the traditional linear vector autoregressive model and vector error correction model techniques in depicting the comovement between the HSPI and inflation rate. The comovement estimates show a positive correlation between the HSPI and inflation rate in the short-term and a negative correlation in the long term which indicates that the Hong Kong securitized real estate market can serve as an inflation hedge in the short term, but becomes a perverse inflation hedge in the long run. This inflation-hedging pattern differs from those of its neighboring major East Asian markets. This study demonstrates that the inflation-hedging capability of securitized real estate is not a static issue, but rather, depends on the length of the forecast horizon.

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The Inflation-Hedging Properties of Risk Assets: The Case of REITs

Cited by 38 publications

References 17 publications

Inflation‐hedging properties of indirect real estate investments in Germany

Inflation‐hedging properties of indirect real estate investments in Germany

Integration between the Asian REIT markets and macroeconomic variables

International Real Estate Review

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