Are REITs inflation hedges?

Abstract

This study investigates the relationship between returns on Real Estate Investment Trusts (REITs) and anticipated inflation. It was motivated by the contradictory findings in the literature concerning the inflation-hedging characteristics of financial and real assets. We employ the methodology developed by Fama and Schwert, which represents a generalization of the Fisher equation. Two different measures of anticipated inflation were used to estimate the regression equations. The results show that REITs generally tend to behave like equities with respect to their hedging characteristics, regardless of how inflation expectations are measured. When we used a survey measure of anticipated inflation, however, we found some evidence that RE1Ts are partial hedges against anticipated inflation.

Threshold Effects in the Relationships of REITs and Other Financial Securities in Developed Countries

“…Most researchers have documented that change in REIT prices are closely related to stock markets (e.g., (Mengden and Hartzell, 1986;Ross and Zisler, 1987;Goetzmann and Ibbotson, 1990;Ennis and Burik, 1991;Ross and Zisler, 1991;Liu and Mei, 1992;Myer and Webb, 1993;Myer and Webb, 1994). In addition, some researchers provided empirical results in which the stock market plays an important role in pricing REIT stock (Gyourko and Linneman, 1988;Giliberto, 1990;Park et al, 1990;Mengden, 1998;Ewing and Payne, 2005). Stevenson (2002) found that the S & P 500 has a greater influence on volatility in each REITs sector than in any other equity sector.…”

“…These conclusions clearly indicate that the stock market plays an important role in REITs performance. Furthermore, some researchers argue that REITs behave like shares of common stock (Gyourko and Linneman, 1988;Park et al, 1990;Ewing and Payne, 2005). Conover et al (2000), Hoesli and Moreno (2007), and Su et al (2010) who found that REITs performance is explained by stock market return when in either bull or bear markets.…”

Financing of Low-Rent Housing REITs in China

“…The value ranges from 10000 to 100000, and greater value means more idle funds in the market. Dr is the dividend proportion of low-rent housing REITs [4,35,53] . The value also ranges from 0.1 to 1, and bigger value means more dividends.…”

A Dynamic Inflation Hedging Trading Strategy Using a CPPI

“…Various asset classes such as equities (Z. Bodie 1976), commodities (Z. , real estate (Rubens, Bond et Webb 2009), REITS (Park, Mullineaux et Chew 1990), and more recently dividend indices (Barclays Capital Research 2008) have been examined as potential real hedges to inflation. Even exotic assets such as forest assets (Washburn et Binkley 1993) and farmland (Newell et Lincoln 2009) just to mention two of them have also been explored but offer very limited interest with respect to the added complexity their investment requires.…”