The Inflation-Hedging Characteristics of Real Estate and Financial Assets in Singapore

Executive Summary. This study empirically tests the inflation hedging characteristics of real estate and financial assets in Singapore. The results show that real estate provides a better hedge against inflation than does stock and securitized real estate. Industrial property is the most effective hedge against both expected and unexpected inflation, whereas shop offers only significant hedge against the expected inflation. The returns of the two assets establish more than one-to-one correspondence relationships with inflation. When the inflation hedging characteristics of assets are tested in different inflation environments, residential property hedges effectively against unexpected inflation in the low inflation regime, whereas the hedging performance of industrial property against both types of inflation is better in the high inflation regime.