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Revisiting the Anomalous Relationship between Inflation and Real Estate Investment Trust Returns in Presence of Structural Breaks: Empirical Evidence from the USA and the UK

Author

Listed:
  • Mahamitra Das

    (Xavier School of Economics, Xavier University Bhubaneswar, Puri, Odisha, India,)

  • Nityananda Sarkar

    (Economic Research Unit of the Indian Statistical Institute Kolkata, Kolkata, West Bengal, India)

Abstract

In this paper we have re-investigated the frequently observed anomalous negative relationship between inflation (INF) and real estate investment trust (REIT) returns for two most important economies viz., the USA and the UK by addressing two aspects of misspecification: Inappropriate functional form and omission of relevant variable. We have found that the anomalous relationship between REIT and INF appear to proxy for the significant effect of relative price variability (RPV) on REIT returns (REITR) in both the countries. Further, it is evidenced that the effect of RPV on REITR is not stable over time in case of the USA while in the UK there is no structural change in the relationship.

Suggested Citation

  • Mahamitra Das & Nityananda Sarkar, 2020. "Revisiting the Anomalous Relationship between Inflation and Real Estate Investment Trust Returns in Presence of Structural Breaks: Empirical Evidence from the USA and the UK," International Journal of Economics and Financial Issues, Econjournals, vol. 10(1), pages 250-258.
    • Handle: RePEc:eco:journ1:2020-01-31
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    More about this item

    Keywords

    Real Estate Investment Trusts; Relative Price Variability; Inflation; Structural Breaks;
    All these keywords.

    JEL classification:

    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • R3 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location

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