Are REITs in Singapore and Hong Kong Being Inflation Hedging? : An empirical analysis of the relationship between REIT returns and inflation

Sammanfattning: This paper examinesinflation in Singapore and Hong Kong between 2002 to 2021. The purpose is to investigate whether REITs can hedge against inflation. The inflation will be divided into expected inflation (EI) and unexpected inflation (UI). Furthermore, the empirical analysis will test the relationship between REIT price return (PI), dividend yield return (DY), and total return (TR) returns and inflation separately and attempt to find out what could be the possible sources of hedging against inflation. The Fama and Schwert (1977) model was applied to analyze the relationship between REIT returns and inflation. The ARIMA model (Baciu, 2015) was applied to measure the expected inflation. Regression results show that the Singapore REIT price returns and total returns positively correlated with unexpected inflation, while the dividend yield returns are negatively correlated with unexpected inflation. However, the Hong Kong REIT price and total returns negatively correlate with expected inflation. This research will provide knowledge about the inflation-hedging characteristics of Singapore and Hong Kong REITs and implications for portfolio management and inflation risk management.