Does REIT index hedge inflation risk? New evidence from the tail quantile dependences of the Markov-switching GRG copula

This paper explores tail quantile dependences between the inflation rate and the real estate investment trust (REIT) return by utilizing the Markov-switching GRG copula. Empirical results show that the dependence between inflation rate and REIT return is mixed, implying that the inflation-hedging ability of REIT index is not fixed. The REIT index is not a hedge against inflation risk during the period of negative dependence; on the contrary, the REIT index has a partially inflation hedging ability during the period of positive dependence. Furthermore, the intensity for the dependence in non-extreme cases is different from that in very extreme cases.