Fastighetsaktier och inflation
Kortsiktiga och långsiktiga samband
The purpose of this paper was to examine the inflation hedging capabilities of property shares. A common notion is that property is a good hedge against inflation. Indeed, positive correlations have been found for direct investments and inflation. However, property shares are generally perceived as a perverse inflation hedge. This discrepancy has often been quoted as evidence of property shares divergence from the development of the underlying property market. However, it has been argued that property shares should be driven by the underlying property market because the companies defining business is identified as the management of the assets themselves. More precisely the management has been recognized as the realization of rent. This paper argued that this management is long term. Moreover the inflation hedging capabilities was seen as long term because the rent is indexed with the inflation and contracts are continuously renegotiated.Cointegration is perceived as an indicator of a long term relationship between processes. Therefore this paper argued of its usefulness for the examination of the inflation hedge of property shares. However, earlier studies have found only for certain markets evidence of a weak cointegrated relationship. It has been noted that the failure to recognize a structural break might lead to the rejection of any cointegration relationship. Therefore this paper took such a possibility into account.Using an error correction framework (ECM), Property shares and inflation was found to be uncorrelated as expected. Evidence of cointegration was found, but no such evidence was found when an unknown structural break was taken into account. Therefore it was suggested as reasonable to believe that property shares is a long term inflation hedge, no matter if it is seen as a perverse inflation hedge in the short run.