Inflation and Real Estate Investments

Abstract

This paper analyzes the inflation sensitivity of real estate investments, comparing them to other inflation-sensitive assets. The most transparent source of real estate investment returns comes from publicly traded stocks of real estate investment trusts (REITs). The authors examine the available return data, with an emphasis on their relationship to US inflation, although conclusions may apply elsewhere as well.

Keywords: Property, securities, real estate investment trusts, REIT, REITs, hedge effectiveness, illiquid assets, portfolio allocation, Sharpe ratio, inflation protection, inflation sensitivity

JEL Classification: E31, G11, G21