The Inflation-Hedging Properties of Risk Assets: The Case of REITs

This study examines the inflation-hedging abilities of REITs over the period 1972:2-1992:12 to determine whether REITs act as a hedge against expected and/or unexpected inflation. The time period used in this study is substantially longer than in earlier studies. A model of real estate returns is derived that has components for expected and unexpected returns and allows for variation in the real return on risky assets. The results indicate that REITs provide some hedging capability against expected inflation, but act as perverse hedges against unexpected inflation. These results are robust with respect to time period studied, measure of expected inflation and proxy for the market portfolio, indicating that the apparent perverse hedging property of real estate investments is not due to methodological problems.

Measuring the Significance of Diversification Gains

This article investigates whether investing in alternative investment media provides statistically significant increases in portfolio performance. Employing methodology introduced by Kandel and Stambaugh (1987) and Gibbons, Ross and Shanken (1989), we measure the statistical significance of diversification gains for portfolios containing real and financial domestic assets, as well as international debt and equity issues. The NCREIF real estate series is further examined using the Geltner (1993) adjustment to the risk measure. In the 1978B93 sample period, neither international assets nor unadjusted real estate ever result in statistically significant increases in portfolio performance. When the Geltner adjustment is made, the allocation to real estate is substantially reduced in the expanded portfolio and also fails to result in a statistically significant increase in portfolio performance. These results may help to resolve the paradox between current portfolio allocations to real estate in practice and those suggested in the literature.

The Inflation-Hedging Effectiveness of Real Estate

Inflation has become one of the predominant financial concerns of the late twentieth century. In the late 1970s, public opinion polls ranked inflation as the number one problem in the United States. While the rate of inflation has slowed since the late 1970s, inflation is still present and many investors expect a resurgence of inflation to higher levels in the near to immediate future. This continued concern about inflation has led to an increased search and evaluation of investments that will protect investors from inflation. Assets that have the ability to protect investors from the effects of inflation are generally labeled inflation hedges. Real estate has been regarded as one of the best inflation hedges of past years. While there has been research in the past evaluating this possibility and some recent research using only business real estate, no current research on residential real estate or farmland as inflation hedges exists. This study examines the inflation-hedging effectiveness of residential real estate, farmland, and business real estate (with a different data set) as individual assets and in a portfolio context for 1960-86.

20-Year Risks of Breast-Cancer Recurrence after Stopping Endocrine Therapy at 5 Years

The administration of endocrine therapy for 5 years substantially reduces recurrence rates during and after treatment in women with early-stage, estrogen-receptor (ER)-positive breast cancer. Extending such therapy beyond 5 years offers further protection but has additional side effects. Obtaining data on the absolute risk of subsequent distant recurrence if therapy stops at 5 years could help determine whether to extend treatment

Long-term outcomes for neoadjuvant versus adjuvant chemotherapy in early breast cancer: meta-analysis of individual patient data from ten randomised trials

Background Neoadjuvant chemotherapy (NACT) for early breast cancer can make breast-conserving surgery more feasible and might be more likely to eradicate micrometastatic disease than might the same chemotherapy given after surgery. We investigated the long-term benefits and risks of NACT and the influence of tumour characteristics on outcome with a collaborative meta-analysis of individual patient data from relevant randomised trials. Methods We obtained information about prerandomisation tumour characteristics, clinical tumour response, surgery, recurrence, and mortality for 4756 women in ten randomised trials in early breast cancer that began before 2005 and compared NACT with the same chemotherapy given postoperatively. Primary outcomes were tumour response, extent of local therapy, local and distant recurrence, breast cancer death, and overall mortality. Analyses by intention-to-treat used standard regression (for response and frequency of breast-conserving therapy) and log-rank methods (for recurrence and mortality). Findings Patients entered the trials from 1983 to 2002 and median follow-up was 9 years (IQR 5–14), with the last follow-up in 2013. Most chemotherapy was anthracycline based (3838 [81%] of 4756 women). More than two thirds (1349 [69%] of 1947) of women allocated NACT had a complete or partial clinical response. Patients allocated NACT had an increased frequency of breast-conserving therapy (1504 [65%] of 2320 treated with NACT vs 1135 [49%] of 2318 treated with adjuvant chemotherapy). NACT was associated with more frequent local recurrence than was adjuvant chemotherapy: the 15 year local recurrence was 21·4% for NACT versus 15·9% for adjuvant chemotherapy (5·5% increase [95% CI 2·4–8·6]; rate ratio 1·37 [95% CI 1·17–1·61]; p=0·0001). No significant difference between NACT and adjuvant chemotherapy was noted for distant recurrence (15 year risk 38·2% for NACT vs 38·0% for adjuvant chemotherapy; rate ratio 1·02 [95% CI 0·92–1·14]; p=0·66), breast cancer mortality (34·4% vs 33·7%; 1·06 [0·95–1·18]; p=0·31), or death from any cause (40·9% vs 41·2%; 1·04 [0·94–1·15]; p=0·45). Interpretation Tumours downsized by NACT might have higher local recurrence after breast-conserving therapy than might tumours of the same dimensions in women who have not received NACT. Strategies to mitigate the increased local recurrence after breast-conserving therapy in tumours downsized by NACT should be considered—eg, careful tumour localisation, detailed pathological assessment, and appropriate radiotherapy

Inflation Hedging Through International Equity Investment

For years common stock were thought to be an effective inflation hedge.  The dismal performance of domestic equities in the 1970’s was, thus, completely unanticipated.  A possible method for improving stock portfolio performance on a period-by-period basis vs. inflation would be the inclusion of foreign equities.  Regression analysis of various foreign equity markets and internationally efficient portfolios vs. measures of actual, expected and unexpected inflation indicated that including non-US equities in portfolios did not protect investors from inflation on a period-by-period basis in the 1970-88 time period

The Effect of Alternative Return Measures on Restricted Mixed-Asset Portfolios

A restricted portfolio is constructed which includes NYSE common stocks, corporate bonds, government bonds, small capitalization common stocks, residential real estate and farmland and returns for each of four different tax brackets (0%, 15%, 30%, 45%). Next, three alternative measures of rates of return for residential real estate and farmland are used. Finally, since some researchers believe that standard risk measures (variance and standard deviation) do not capture the total risk in real estate, the risk for the real estate returns is increased five times while the returns are held constant. The twenty-four optimal portfolios (four tax brackets with two measures of risk and three measure of return for residential real estate and farmland) are then derived. These results are then compared and contrasted to each other to ascertain the change in sensitivity of the optimal portfolios due to different tax rates, different rates-of-return estimates and different risk estimates. Copyright American Real Estate and Urban Economics Association.