Infrastructure: Real Assets and Real Returns

23 Pages Posted: 16 Sep 2014

See all articles by Ronald Geoffrey Bird

Ronald Geoffrey Bird

University of Technology Sydney (UTS) - School of Finance and Economics; Financial Research Network (FIRN)

Harry Liem

Independent

Susan Thorp

The University of Sydney Business School

Date Written: September 2014

Abstract

Little empirical work has been done on infrastructure as an asset class despite increased allocations by institutional investors. We build a robust factor model of infrastructure returns using US and Australian infrastructure and utility data to test manager claims that infrastructure investments offer benefits via a combination of monopolistic and defensive assets. We find evidence of excess returns and inflation hedging, but not of defensive characteristics. We compare option‐based models designed to replicate infrastructure asset returns, and identify the regulatory risk premium. A combination of inflation linked bonds and covered call strategies results in improved defensive and inflation hedging characteristics.

Keywords: inflation hedging, regulatory risk premium, infrastructure assets

Suggested Citation

Bird, Ronald Geoffrey and Liem, Harry and Thorp, Susan, Infrastructure: Real Assets and Real Returns (September 2014). European Financial Management, Vol. 20, Issue 4, pp. 802-824, 2014, Available at SSRN: https://ssrn.com/abstract=2496685 or http://dx.doi.org/10.1111/j.1468-036X.2012.00650.x

Ronald Geoffrey Bird (Contact Author)

University of Technology Sydney (UTS) - School of Finance and Economics ( email )

Haymarket
Sydney, NSW 2007
Australia
+ 612 9514 7716 (Phone)
+ 612 9514 7711 (Fax)

Financial Research Network (FIRN)

C/- University of Queensland Business School
St Lucia, 4071 Brisbane
Queensland
Australia

HOME PAGE: http://www.firn.org.au

Harry Liem

Independent ( email )

Susan Thorp

The University of Sydney Business School ( email )

Abercrombie Building
H70
The University Of Sydney, NSW 2006
Australia
0290366354 (Phone)

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