This paper investigates the inflation hedging capability of listed real estate (LRE) companies from 1990 to 2021 in four economies: the US, the UK, Australia, and Japan. By using a Markov switching vector error correction model (MS-VECM), we identify that the short-term hedging ability moves towards being negative or zero during crisis periods. In non-crisis periods, LRE provides good protection against inflation. In the long term, LRE provides a good hedge against expected inflation, and shows a superior inflation hedging ability than stocks. Additionally, we propose inflation-hedging portfolios by minimizing the expected shortfall. This inflation-hedging portfolio allocation methodology suggests that listed real estate stocks should play a significant role in investor portfolios.
Muckenhaupt, Jan, Martin Hoesli, and Bing Zhu. "Listed Real Estate as an Inflation Hedge across Regimes." In 29th Annual European Real Estate Society Conference. ERES: Conference. London, United Kingdom, 2023.
Section: PhD Workshop