The inflation hedging characteristics of US and UK investments: A multi-factor error correction approach

Journal of Real Estate Finance and Economics

Volumn 36, Issue 2, 2008, Pages 183-206

  Hoesli, Martin ^a   Lizieri, Colin ^c   MacGregor, Bryan ^b  

^a UNIVERSITY OF GENEVA   (Switzerland)

^b UNIVERSITY OF ABERDEEN   (United Kingdom)

^c UNIVERSITY OF READING   (United Kingdom)

Author keywords

Error correction model; Inflation hedging; Investment returns; Real estate

Indexed keywords

EID: 38149097635     PISSN: 08955638     EISSN: None     Source Type: Journal    
DOI: 10.1007/s11146-007-9062-6     Document Type: Article

References (60)

1. Bakshi, G. S., & Chen, Z. (1996). Inflation, asset prices and the term structure of interest rates in monetary economies. Review of Financial Studies, 9(1), 241-276.
2. Balduzzi, P. (1995). Stock returns, inflation and the 'Proxy Hypothesis': A new look at the data. Economic Letters, 48(1), 47-53.
3. Barber, C., Robertson, D., & Scott, A. (1997). Property and inflation: The hedging characteristics of U.K. real estate. Journal of Real Estate Finance and Economics, 15(1), 59-76.
4. Bodie, Z. (1976). Common stocks as a hedge against inflation. Journal of Finance, 31(2), 459-470.
5. Boudoukh, J., & Richardson, M. (1993). Stock returns and inflation: A long-horizon approach. American Economic Review, 83(5), 1346-1355.
6. Boudoukh, J., Richardson, M., & Whitelaw, R. F. (1994). Industry returns and the fisher effect. Journal of Finance, 49(5), 1595-1615.
7. Brueggeman, W. B., Chen, A. H., & Thibodeau, T. G. (1984). Real estate investment funds: Performance and portfolio considerations. AREUEA Journal, 12(3), 333-354.
8. Chan, K. C., Hendershott, P. H., & Sanders, A. B. (1990). Risk and return in real estate: Evidence from equity REITs. AREUEA Journal, 18(4), 431-452.
9. Chatrath, A., & Liang, Y. (1998). REITs and inflation: A long-run perspective. Journal of Real Estate Research, 16(3), 311-325.
10. Chen, K. C., & Tzang, D. D. (1988). Interest rate sensitivity of real estate investment trusts. Journal of Real Estate Research, 3(3), 13-22.
11. Chen, S.-J., Hsieh, C., Vines, T. W., & Chiou, S.-N. (1998). Macroeconomic variables, firm-specific variables and returns to REITs. Journal of Real Estate Research, 16(3), 269-276.
12. Chopin, M., & Zhong, M. (2001). Stock returns, inflation and the macro-economy: The long- and short-run dynamics. In Advances in Investment and Portfolio Management 8, 1-8, Greenwich, CT: JAI Press
13. Cochran, S. J., & Defina, R. H. (1993). Inflation's negative effects on real stock prices: New evidence and a test of the proxy effect hypothesis. Applied Economics, 25(2), 263-274.
14. Danthine, J.-P., & Donaldson, J. B. (1986). Inflation and asset prices in an exchange economy. Econometrica, 54(3), 585-606.
15. Darnell, A. C. (1994). A dictionary of econometrics. Cheltenham, U.K.: Edward Elgar.
16. Darrat, A. F., & Glascock, J. L. (1989). Real estate returns, money and fiscal deficits: Is the real estate market efficient? Journal of Real Estate Finance and Economics, 2(3), 197-208.
17. Ely, D. P., & Robinson, K. J. (1997). Are stocks a hedge against inflation? International evidence using a long-run approach. Journal of International Money and Finance, 16(1), 141-167.
18. Fama, E. F. (1981). Stock returns, real activity, inflation and money. American Economic Review, 71(4), 545-565.
19. Fama, E. F., & Gibbons, M. R. (1984). A comparison of inflation forecasts. Journal of Monetary Economics, 13(3), 327-348.
20. Fama, E. F., & Schwert, G. W. (1977). Asset returns and inflation. Journal of Financial Economics, 5(2), 115-146.
21. Firth, M. (1979). The relationship between stock market returns and rates of inflation. Journal of Finance, 34(3), 743-749.
22. Fisher, I. (1930). The theory of interest, New York: MacMillan.
23. Fisher, J. D., Geltner, D., & Pollakowski, H. O. (2006). A quarterly transaction-based index of real estate investment performance and movements in supply and demand. Paper presented to the AREUEA Annual Meeting, Boston, January 2006.
24. Geltner, D., MacGregor, B. D., & Schwann, G. M. (2003). Appraisal smoothing and price discovery in real estate markets. Urban Studies, 40(5/6), 1047-1064.
25. Geske, R., & Roll, R. (1983). The monetary and fiscal linkage between stock returns and inflation. Journal of Finance, 38(1), 1-33.
26. Glascock, J. L., Lu, C., & So, R. W. (2002). REIT returns and inflation: Perverse or reverse causality effects? Journal of Real Estate Finance and Economics, 24(3), 301-317.
27. Goebel, P. R., & Kim, K. S. (1989). Performance evaluation of finite-life real estate investment trusts. Journal of Real Estate Research, 4(2), 57-70.
28. Gyourko, J., & Linneman, P. (1988). Owner-occupied homes, income-producing real estate and REIT as inflation hedges. Journal of Real Estate Finance and Economics, 1(4), 347-372.
29. Hartzell, D., Hekman, J. S., & Miles, M. E. (1987). Real estate returns and inflation. AREUEA Journal, 15(1), 617-637.
30. Harvey, A. C. (1990). The econometric analysis of time series. London: Philip Allan.
31. Hendershott, P. H., & MacGregor, B. D. (2005). Investor rationality: An analysis of NCREIF commercial property data. Journal of Real Estate Research, 27(4), 445-475.
32. Hess, P. J., & Lee, B.-S. (1999). Stock returns and inflation with supply and demand disturbances. Review of Financial Studies, 12(5), 1203-1218.
33. Hoesli, M., MacGregor, B. D., Matysiak, G. A., & Nanthakumaran, N. (1997). The short-term inflation-hedging characteristics of UK real estate. Journal of Real Estate Finance and Economics, 15(1), 27-57.
34. Jaffe, J. F., & Mandelker, G. (1976). The 'Fisher Effect' for risky assets: An empirical investigation. Journal of Finance, 31(2), 447-458.
35. Kaul, G. (1987). Stock returns and inflation. Journal of Financial Economics, 18(2), 253-276.
36. Kaul, G. (1990). Monetary regimes and the relationship between stock returns and inflationary expectations. Journal of Financial and Quantitative Analysis, 25(3), 307-322.
37. Kaul, G., & Seyhun, H. N. (1990). Relative price variability, real shocks and the stock market. Journal of Finance, 45(2), 479496.
38. Lai, T.-Y., & Wang, K. (1998). Appraisal smoothing: The other side of the story. Real Estate Economics, 26(3), 511-535.
39. Larsen, A. B., & McQueen, G. R. (1995). REITs, real estate and inflation: Lessons from the gold market. Journal of Real Estate Finance and Economics, 10(3), 285-297.
40. Lee, B. S. (1989). Solving, estimating and testing a nonlinear stochastic equilibrium model with an example of the asset returns and inflation relationship. Journal of Economic Dynamics and Control, 13(4), 499-531.
41. Lee, B. S. (1992). Causal relations among stock returns, interest rates, real activity and inflation. Journal of Finance, 47(4), 1591-1603.
42. Lee, K. (1999). Unexpected inflation, inflation uncertainty and stock returns. Applied Financial Economics, 9(4), 315-328.
43. Limmack, R. J., & Ward, C. W. R. (1988). Property returns and inflation. Land Development Studies, 5(3), 7-55.
44. Ling, D. C., & Naranjo, A. (1997). Economic risk factors and commercial real estate returns. Journal of Real Estate Finance and Economics, 14(3), 283-307.
45. Ling, D. C., & Naranjo, A. (1999). The integration of commercial real estate markets and stock markets. Real Estate Economics, 27(3), 483-516.
46. Lintner, J. (1975). Inflation and security returns. Journal of Finance, 30(2), 259-280.
47. Liu, C. H., Hartzell, D. J., & Hoesli, M. E. (1997). International evidence on real estate securities as an inflation hedge. Real Estate Economics, 25(2), 193-221.
48. Marshall, D. A. (1992). Inflation and asset returns in a monetary economy. Journal of Finance, 47(4), 1315-1342.
49. Miles, M., & McCue, T. (1982). Historic returns and institutional real estate portfolios. AREUEA Journal, 10(2), 184-199.
50. Murphy, A. J., & Kleiman, R. T. (1989). The inflation hedging characteristics of equity REITs: An empirical study. Quarterly Review of Economics and Finance, 29(3), 95-101.
51. Nelson, C. R. (1976). Inflation and rates of return on common stocks. Journal of Finance 31(2), 471-483.
52. Newell, G. (1996). The Inflation-Hedging Characteristics of Australian Property. Journal of Property Finance, 7(1), 6-20.
53. Park, J., Mullineaux, D. J., & Chew, I.-K. (1990). Are REITs inflation hedges? Journal of Real Estate Finance and Economics, 3(1), 91-103.
54. Pilotte, E. A. (2003). Capital gains, dividend yields and expected inflation. Journal of Finance, 58(1), 447-466.
55. Sirmans, G. S., & Sirmans, C. F. (1987). Real estate returns: The historic perspective. Journal of Portfolio Management, 13(3), 22-31.
56. Solnik, B., & Solnik, V. (1997). A multi-country test of the fisher model of stock returns. Journal of International Financial Markets, Institutions and Money, 7(4), 289-301.
57. Stulz, R. M. (1986). Asset pricing and inflation. Journal of Finance, 41(1), 209-223.
58. Titman, S., & Warga, A. (1986). Risk and performance of real estate investment trusts. AREUEA Journal, 14(3), 414-431.
59. Vanderhoff, J., & Vanderhoff, M. (1986). Inflation and stock returns: An industry analysis. Journal of Economics and Business, 38(4), 341-352.
60. Wurtzebach, C. H., Mueller, G. R., & Machi, D. (1991). The impact of inflation and vacancy on real estate returns. Journal of Real Estate Research, 6(2), 153-168.