REITs and Inflation: A Long-Run Perspective

We examine whether REITs provide an inflation hedge in the long run. We also investigate whether the apparent lack of a positive relationship between general prices and REIT returns in prior studies arises from the impact that stock market movements have on REITs. As in most prior research, regression analysis provides no evidence that REIT returns are positively related to temporary or permanent components of inflation measures. We rule out the possibility that a stock market-induced proxy effect is the cause for the apparent lack of relationship between REITs and inflation. On the other hand, we find some evidence that REITs provide a long-run inflation hedge. Johansen (1988) tests for cointegration isolate cointegrating vectors between alternate REIT indices and the CPI over the 1972-95 interval. However, the more standard residual-based cointegration techniques failed to provide similar evidence.

Apartment REITs and Apartment Real Estate

This study employs a "hedged" apartment REIT index to track the performance of apartment real estate and to assess the performance of apartments in efficient mixed-asset portfolios consisting of stocks, bonds and real estate. The hedged apartment index reflects the returns of apartment REITs after the effects of equity REITs and the stock market are removed from the apartment REIT returns. It is demonstrated that the hedged apartment REIT index captures a substantial amount of the volatility unique to apartment real estate. Furthermore, the hedged apartment REIT index does not suffer from the appraisal-smoothing problem and the apparent seasonality of appraisal-based indices, such as the Russell-NCREIF apartment index. Therefore, it would appear that the hedged apartment REIT index can be employed as a proxy for apartment real estate in portfolio allocation decisions. This study provides evidence that apartment real estate should be a candidate for some efficient mixed-asset portfolios.

Are REIT Returns Hedgeable?

This study examines the ability of existing futures contracts to hedge the returns on real estate investment trusts (REITs). The results from various hedging strategies suggest that existing futures contracts do not provide the means to effectively hedge REIT returns. REITs could remain unhedgeable until futures contracts written specifically on REITs are developed.

Real Asset Ownership and the Risk and Return to Stockholders

Many corporations own a significant amount of real assets and this includes real estate. However, the effect of real asset ownership on the risk and return for a firm’s stockholders is unknown. This study attempts to ascertain the effect, if any, of corporate real asset ownership on the risk and return to stockholders. Using data from 1985 through 1994, the results indicate a lack of diversification benefits associated with holding real assets.

Price Discovery In The Soybean Futures Market

This paper investigates the price discovery process between the nearby futures prices of soybean, soy meal, and soy oil contracts (Crush constituents) in the U.S.   Relationships between these commodities may bear important implications for trading strategies, market inefficiencies, or the derived demand theory.  Furthermore, our findings are relevant in light of market microstructure theories, which maintain that the price information disseminates from more liquid contracts.  Our VAR and bivariate GARCH model estimates suggest a strong bi-directional causality in Crush futures prices.  We also find that while soybean contracts bear the burden of convergence when the spread between soybean and soy meal contract prices widens, this is not true of soybean and soy oil contracts.  Furthermore, we show evidence of considerable volatility persistence for the three contracts and volatility spillover between soybean and other Crush constituent futures.  The statistical evidence suggests that information arrives in these markets simultaneously.  Our findings do not support the derived demand theory

Is the price of crude responsive to macroeconomic news? A test of the stock-flow hypothesis

Includes bibliographical references (pages 26-28).Published as: Does the price of crude oil respond to macroeconomic news?, Journal of Futures Markets, vol.32, no. 6, pp.536-559, June 2012, https://doi.org/10.1002/fut.20525.A recent study indicates that the daily price of crude oil is mostly unresponsive to macroeconomic news, at times exhibiting response-coefficients that carry the “wrong sign”. The study concludes that the price of crude oil is predetermined to macro aggregates, and hence determined in a flow demand and flow supply framework. We make the economic argument that inferences on commodity price determination should be drawn from news responses only after the standard tests are subject to inventory (or stock) controls. Using both daily and intraday data for crude oil, and using rudimentary tools to isolate perceived inventory levels, we test for the stock-flow hypothesis for crude oil. We find only weak evidence on the role of inventory levels for crude oil. We also assess the extent to which the dynamics of the dollar plays in the results, and find its role to be limited. Overall, the prior conclusion that crude oil is priced primarily in a flow-environment is supported by our data. The initial (intraday) response in energy prices to macro news appears to be the result of noise trading

Linkage Between GDP And Emissions: A Global Perspective On Environmental Kuznets Curve

In this paper we present a mathematical framework for the linkage between GDP and emissions for a particular nation or group of nations.  The properties of the functions will be discussed, followed by an empirical section that illustrates the methodology employed.  We will also present the greenhouse gases emissions data and GDP data and discuss the results of the empirical study

Inflation, Output, And Stock Prices: Evidence From Brazil

Research in economics and finance documents a puzzling negative relationship between stock returns and inflation rates in markets of industrialized economies.  The present study investigates this relationship for Brazil. We show that the negative relationship between the real stock returns and unexpected inflation persists after purging inflation of the effects of the real economic activity.  The Johansen and Juselius cointegration tests verify a long-run equilibrium between stock prices, general price levels, and the real economic activity. Furthermore, stock prices and general price levels also show a strong long-run equilibrium with the real economic activity and each other.   The findings lend support to Fama’s proxy hypothesis in the long-run

Currency jumps, cojumps and the role of macro news

Includes bibliographical references (pages 24-27).Published as: Journal of International Money and Finance, vol.40, pp.42-62, February 2014, https://doi.org/10.1016/j.jimonfin.2013.08.018.This study investigates the impact of macro news on currency jumps and cojumps. The analysis uses intra-day data, sampled at 5-min frequency, for four currencies for the period 2005–2010. Results indicate that currency jumps are a good proxy for news arrival. We find 9–15% of currency jumps can be directly linked to U.S. announcements. Notably, news can explain 22–56% of the 5-min jump returns, and there is evidence that better-than-expected news about the U.S. economy has a negative impact on currency jumps. Cojump statistics suggest close dependencies among European currencies, especially between the euro and the Swiss franc. We also provide evidence on the uncertainty resolution to news

Examination of the flow characteristics of crude oil: evidence from risk-neutral moments, An

Includes bibliographical references (pages 26-29).Published as: Energy Economics, vol. 54, February 2016, pp. 213-223, https://doi.org/10.1016/j.eneco.2017.09.010.This paper examines the information content of risk-neutral moments to explain crude oil futures returns. Implied volatility and higher moments are extracted from observed crude oil option prices using a model-free implied volatility framework and the Black–Scholes model. We find a tenuous and time-varying association between returns and implied volatility and its innovations. Specifically, changes in implied volatility are found to be meaningfully associated with crude returns only over the period spanning the recent financial crisis. The results lead us to conclude that crude oil prices are determined primarily in a flow demand/supply environment. Finally, we document that oil risk is priced into the cross-section of stock returns in the oil and transportation sectors