Can housing investment hedge against inflation?
International Journal of Housing Markets and Analysis
ISSN: 1753-8270
Article publication date: 5 August 2022
Issue publication date: 27 November 2023
Abstract
Purpose
This paper aims to test the hedging ability of housing investment against inflation in Japan and the USA during the period 2000–2020.
Design/methodology/approach
This study applies the deep learning method and The exponential general autoregressive conditional heteroskedasticity in mean (1, 1) model with breaks.
Findings
Within the asymmetric framework, it is found that housing returns (HR) can hedge against inflation in both these markets, which mentions that when investing in the housing market in Japan and the USA, investors are compensated for bearing from inflation. This result is consistent with Fisher’s hypothesis. Especially, the empirical results show that the risk-return tradeoff is available in Japan’s housing market and not available in the US housing market. Any signal of a high inflation rate – referred to as “bad news” – may cause a drop in HR in Japan and a raise in the USA.
Originality/value
To the best of the author’s knowledge, this is one of the first studies using the deep learning method (long short-term memory model) to estimate the expected/unexpected inflation rates.
Keywords
Citation
Nguyen, B.T.T. (2023), "Can housing investment hedge against inflation?", International Journal of Housing Markets and Analysis, Vol. 16 No. 6, pp. 1071-1088. https://doi.org/10.1108/IJHMA-06-2022-0084
Publisher
:Emerald Publishing Limited
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