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Paper eres2010_289:
INFLATION-HEDGING, ASSET ALLOCATION AND THE INVESTMENT HORIZON

id eres2010_289
authors Fleischmann, Benedikt; Rehring, Christian; Sebastian, Steffen
year 2010
title INFLATION-HEDGING, ASSET ALLOCATION AND THE INVESTMENT HORIZON
source 17th Annual European Real Estate Society Conference in Milan, Italy
summary Focusing on the role of the investment horizon, we analyze the inflation-hedging abilities of stocks, bonds, cash, and direct commercial real estate investments, and the implications of the inflation-hedge results for asset allocation. Based on vector autoregressions for the UK market we find that the inflation-hedging abilities of all assets improve with the investment horizon. For long horizons, real estate seems to hedge unexpected inflation as well as cash. This has implications for the difference between the return volatility of real returns versus the return volatility of nominal returns, and ultimately for asset allocations. Portfolio optimizations based on real returns yield higher allocations to cash and real estate than optimizations based on nominal returns. Bonds tend to be less attractive for an investor taking into account inflation. Switching from nominal to real returns, the allocation to stocks is decreasing at medium investment horizon, but increasing at long horizons.
keywords Real Estate, Inflation Hedging, Return Predictability, VAR
series ERES:conference
email benedikt.fleischmann@irebs.de
discussion No discussions. Post discussion ...
ratings
session doctoral
last changed 2010/07/16 14:16
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