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An Examination of the Inflation Hedging Ability of Irish Real Estate

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  • Simon Stevenson
  • Louis Murray

Abstract

Executive Summary. This article examines the inflation hedging ability of the commercial real estate sector in the Republic of Ireland. Tests using the conventional Fama and Schwert (1977) model are conducted, together with cointegration and causality tests. The data is initially analyzed over the period 1985 to 1996. Regression results do not provide any evidence to support the hypothesis that real estate acts as an effective inflation hedge. Since the study period coincides with a period of relative stability in Irish inflation rates, the tests are rerun using annual data from 1969, however the results are unaltered. A further finding was that, using virtually all models, real estate offers a significant positive real return. Cointegration tests, examining long term hedging ability, similarly find no evidence to support the hypothesis. However, the causality models do indicate that real estate leads inflation.

Suggested Citation

  • Simon Stevenson & Louis Murray, 1999. "An Examination of the Inflation Hedging Ability of Irish Real Estate," Journal of Real Estate Portfolio Management, Taylor & Francis Journals, vol. 5(1), pages 59-69, January.
    • Handle: RePEc:taf:repmxx:v:5:y:1999:i:1:p:59-69
    DOI: 10.1080/10835547.1999.12089569
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