The inflation‐hedging characteristics of Malaysian residential property

The inflation‐hedging characteristics of Malaysian residential property Purpose – This study aims to extend the current literature by examining the inflation‐hedging effectiveness of Malaysian residential property in the short run and long run. Malaysia is an emerging market and has some unique characteristics. Therefore, a dedicated study in this market is critical. Design/methodology/approach – The analysis of this study involves two stages. The first stage is to estimate the inflation‐hedging ability of Malaysian residential property in the short run. The Fama and Schwert model was employed. Thereafter, the long‐run inflation‐hedging effectiveness was assessed by using a dynamic ordinary least squares (DOLS) model. Findings – The Fama and Schwert tests reveal that Malaysian residential property does provide some satisfactory hedge against the expected inflation component over the short run. However, variations are evident among different types of residential property. The DOLS results provide strong evidence to support that housing is an effective hedge against the expected inflation in the long run, whereas no comparable evidence is found for the unexpected inflation component. Practical implications – The findings enable more informed and practical investment decision‐making regarding the role of housing in inflation risk management. Originality/value – This paper is the first study to offer empirical evidence of the inflation‐hedging attributes of Malaysian residential property. Moreover, the inflation‐hedging effectiveness of different types of residential property is also compared for the first time. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png International Journal of Housing Markets and Analysis Emerald Publishing

The inflation‐hedging characteristics of Malaysian residential property

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Publisher
Emerald Publishing
Copyright
Copyright © 2014 Emerald Group Publishing Limited. All rights reserved.
ISSN
1753-8270
DOI
10.1108/IJHMA-10-2012-0053
Publisher site
See Article on Publisher Site

Abstract

Purpose – This study aims to extend the current literature by examining the inflation‐hedging effectiveness of Malaysian residential property in the short run and long run. Malaysia is an emerging market and has some unique characteristics. Therefore, a dedicated study in this market is critical. Design/methodology/approach – The analysis of this study involves two stages. The first stage is to estimate the inflation‐hedging ability of Malaysian residential property in the short run. The Fama and Schwert model was employed. Thereafter, the long‐run inflation‐hedging effectiveness was assessed by using a dynamic ordinary least squares (DOLS) model. Findings – The Fama and Schwert tests reveal that Malaysian residential property does provide some satisfactory hedge against the expected inflation component over the short run. However, variations are evident among different types of residential property. The DOLS results provide strong evidence to support that housing is an effective hedge against the expected inflation in the long run, whereas no comparable evidence is found for the unexpected inflation component. Practical implications – The findings enable more informed and practical investment decision‐making regarding the role of housing in inflation risk management. Originality/value – This paper is the first study to offer empirical evidence of the inflation‐hedging attributes of Malaysian residential property. Moreover, the inflation‐hedging effectiveness of different types of residential property is also compared for the first time.

Journal

International Journal of Housing Markets and AnalysisEmerald Publishing

Published: Feb 25, 2014

Keywords: Malaysia; Housing; Inflation‐hedging effectiveness

References

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