Abstract
We examine whether direct commercial real estate (CRE) is an inflation hedge using the Korean market. We find that Korean CRE shows shor-trun positive co-movement with both expected and unexpected inflation, indicating that CRE serves as a short-run inflation hedge. We also find that inflation and CRE prices move in the same direction over the long run as well indicating that CRE serves as a long run positive inflation hedge. On the other hand, we find that listed equity is a short-run negative hedge and a long run positive hedge. Therefore, we conclude that CRE is an asset class that is different from listed stock. Finally, while GDP and inflation appear to be the common factors driving Korean CRE markets and listed equity capital markets (ECM), ECM returns lead CRE returns, suggesting that value-relevant information flows into the ECM, then into CRE.