Daniel Fehrle
Hedging
Against Inflation: Housing vs. Equity
Abstract:
To
which extent do equity and housing hedge against inflation? Despite an
extensive literature, there is only little consensus. This paper
presents new evidence from the Jordà-Schularick-Taylor
Macrohistory Database, which covers return rates on housing
and equity as well as consumer price indices of 16 developed countries
from 1870 - 2015. The results depend on the time horizon and period
considered. Within one, five, and ten years housing hedges, at least
partly, against inflation and the hedge has been
better in the post-war period. In the long run housing provides an
excessive hedge in the whole sample and a perfect hedge in the post-war
period. Equity provides no hedge within one-year in the whole sample
period and the returns tend to decrease with inflation
in the post-war period. The hedge improves slightly with a longer time
horizon and is perfect in the long run in the post-war period. Thus,
housing is, at least weakly, superior in hedging against inflation. The
results are robust to a non-housing consumption price index and an
asset price appreciation approach.
JEL: C22, C23, E31, E44, G11, N10
Paper:
Paper available as pdf-file.
Beitrag Nr. 342, Volkswirtschaftliche Diskussionsreihe, Institut
für
Volkswirtschaftslehre der Universität Augsburg
Contact:
Daniel
Fehrle, University of Augsburg, Department of Economics,
D-86135
Augsburg,
Germany, phone +49-821-598-4201, fax +49-821-598-4231
email: daniel.fehrle@wiwi.uni-augsburg.de
Bo.,
07.06.2021