Inflation Hedging Characteristics of Real Estate Assets in Hong Kong

25 Pages Posted: 30 Jul 2008

See all articles by John L. Glascock

John L. Glascock

University of Connecticut - School of Business - Center for Real Estate and Urban Economic Studies; European Business School

Lei Feng

Renmin University of China

Li Fan

Gaw Capital Partners

Helen X. H. Bao

University of Cambridge - Department of Land Economy

Date Written: July 27, 2008

Abstract

In this paper the inflation hedging characteristics of Hong Kong real estate market are examined using 1998-2006 data. Both short-term and long-term methods are used. The short-term method follows Fama and Schwert framework. To separate expected and unexpected inflation rate from nominal inflation rate, it is assumed that expected inflation can be reflected directly from time deposit rate in Hong Kong. For long-term analysis the Cointegration method and Granger Causality test are adopted in the analysis. It is found that real estate assets in Hong Kong are not good hedge against inflation, in both short-term and long-term. Also, different types (commercial, office, residential and industrial) of properties show different inflation hedging characters in different periods.

Keywords: Real estate, Property returns, Inflation, Hedging

JEL Classification: C22, E3, R51

Suggested Citation

Glascock, John L. and Feng, Lei and Fan, Li and Bao, Helen X. H., Inflation Hedging Characteristics of Real Estate Assets in Hong Kong (July 27, 2008). Available at SSRN: https://ssrn.com/abstract=1180658 or http://dx.doi.org/10.2139/ssrn.1180658

John L. Glascock

University of Connecticut - School of Business - Center for Real Estate and Urban Economic Studies ( email )

Storrs, CT 06269
United States

European Business School ( email )

Gustav-Stresemann-Ring 3
Wiesbaden, Hessen 65189
Germany

Lei Feng

Renmin University of China ( email )

Room B906
Xianjin Building
Beijing, Beijing 100872
China

Li Fan

Gaw Capital Partners ( email )

HONG KONG
HK
Hong Kong

Helen X. H. Bao (Contact Author)

University of Cambridge - Department of Land Economy ( email )

19 Silver Street
Cambridge, CB3 9EP
United Kingdom

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