REIT Returns and Inflation: Perverse or Reverse Causality Effects?

REIT Returns and Inflation: Perverse or Reverse Causality Effects? Contrary to the Fisherian theory of interest, previous studies document a negative relationship between REIT (Real Estate Investment Trust) returns and inflation. In this research, we re-examine this perverse inflation behavior by testing for the causal relationships among REIT returns, real activity, monetary policy, and inflation through a vector error correction model. Our results indicate that the observations of REIT returns as perverse inflation hedges are spurious. The observed negative relationship between REIT returns and inflation is in fact a manifestation of the effects of changes in monetary policies. These findings are consistent with Darrat and Glascock's (1989) evidence of monetary effects on REIT returns. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png The Journal of Real Estate Finance and Economics Springer Journals

REIT Returns and Inflation: Perverse or Reverse Causality Effects?

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Publisher
Springer Journals
Copyright
Copyright © 2002 by Kluwer Academic Publishers
Subject
Economics; Regional/Spatial Science; Financial Services
ISSN
0895-5638
eISSN
1573-045X
D.O.I.
10.1023/A:1015221515787
Publisher site
See Article on Publisher Site

Abstract

Contrary to the Fisherian theory of interest, previous studies document a negative relationship between REIT (Real Estate Investment Trust) returns and inflation. In this research, we re-examine this perverse inflation behavior by testing for the causal relationships among REIT returns, real activity, monetary policy, and inflation through a vector error correction model. Our results indicate that the observations of REIT returns as perverse inflation hedges are spurious. The observed negative relationship between REIT returns and inflation is in fact a manifestation of the effects of changes in monetary policies. These findings are consistent with Darrat and Glascock's (1989) evidence of monetary effects on REIT returns.

Journal

The Journal of Real Estate Finance and EconomicsSpringer Journals

Published: Oct 18, 2004

References

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