Listed Real Estate as an Inflation Hedge across Regimes - new publication by Martin Hoesli
In a new paper, Prof. Martin Hoesli 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), Hoesli and his co-authors 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 offers a good hedge against expected inflation and shows a superior inflation hedging ability than stocks.
Additionally, they identify 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.
The paper is co-authored with Jan Muckenhaupt and Bing Zhu from the Technical University of Munich, and has been accepted for publication in the Journal of Real Estate Finance and Economics.Sep 26, 2023