Can Real Estate Provide a Hedge Against Inflation? Evidence from China
Traditionally, according to the Fisher effect hypothesis, real estate is a preferred asset of preservation for hedging against inflation and allocating asset.But this hypothesis has long been questioned, and thus a very different two types of views about this issue are formed.With the expansion of the portfolio theory, the paper demonstrates the intrinsic correlation mechanism between real estate investment returns and inflation.Based on Chinese 2001-2011 monthly data, implementing ARIMA techniques to decompose the rate of inflation, the paper uses VECM model to study the effect of inflation on the real estate investment return rate and finds that real estate investment can not hedge against inflation.The cause of detail is studied and we find in China, due to the proxy effect and inflation illusion effect, higher inflation will weaken the real estate price appreciation, reduce the real estate investment return.The paper concludes that guiding reasonably inflation expectations can improve the ability of real estate investments hedging against inflation.At the same time, fully examining the impact of the interest rate policys lag on inflation and prudently using interest rate instruments can effectively manage inflation.
Hedging Real estate investment Inflation VECM
Chen Jian Gao Bo
Business School, Shandong Jianzhu University, Jinan, P.R.China, 250101 ; School of Economics, Nanjin School of Economics, Nanjing University, Nanjing, P.R.China, 210093
国际会议
The 5th Conference on Chinas Economic Operation Risk Management(2011`Shanghai)(第五届中国立信风险管理论坛)
上海
英文
10-24
2011-11-04(万方平台首次上网日期,不代表论文的发表时间)