International Evidence on Real Estate Securities as an Inflation Hedge
Cahiers de recherche; 1995.08
|Abstract||Prior research indicates that real estate securities, like other stocks which trade on an organized exchange, do not hedge against inflation even though evidence exists that returns on the underlying real estate is positively related to both expected and unexpected inflation. The current study investigates whether this relationship is also valid for other countries since the design of the real estate security in some countries is such that the return on the real estate security is more representative of the return to the underlying real estate. Both a stationary and a nonstationary riskfree rate are alternatively used in conjunction with the Fama and Schwert (1977) methodology to investigate this question. The study also investigates the hypothesis of Geske and Roll (1983) that stock returns are the catalyst to changes in fiscal and monetary policy that cause an opposite change in the rate of inflation. Our results do not provide any evidence that real estate securities in other countries are better hedges against inflation than common stocks. In fact, we find that real estate securities appear to provide a worse hedge against inflation that common stocks in some countries. In addition to this, we find that of the three models of inflation, the data appear to more closely support the reverse causality model of Geske-Roll. Moreover, our results suggest that property trust returns provide a more accurate forecast of inflation than the returns on the stock market index for France and Switzerland. For all other countries however, the returns on common stocks provide just as good a signal on changes in inflationary expectations as property trust returns|
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|HARTZELL, David J., LIU, Crocker H., HOESLI, Martin E. International Evidence on Real Estate Securities as an Inflation Hedge. 1995 https://archive-ouverte.unige.ch/unige:5986|