A cointegration analysis of inflation and real estate returns

Research output: Journal Publications and Reviews (RGC: 21, 22, 62)21_Publication in refereed journalpeer-review

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Detail(s)

Original languageEnglish
Pages (from-to)207-223
Journal / PublicationJournal of Real Estate Portfolio Management
Volume19
Issue number3
Publication statusPublished - Sep 2013

Abstract

This study investigates the causal relationship between inflation and property returns and the short- and long-term inflation hedging effectiveness of property assets in Hong Kong. The results show that residential property is the only property type providing an effective hedge against actual, expected, and unexpected inflation during the sample period. The autoregressive distributed lag (ARDL) bounds testing results indicate that inflation and property are cointegrated. The causality results support that inflation leads property returns, but not vice versa. The one-way causality between inflation and real estate returns can be better explained by the operation of the Hong Kong currency board system as investment funds flow to the risky real estate assets from banking deposits due to the prospect of lower or even negative interest rates caused by rising inflation in Hong Kong.

Bibliographic Note

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