HEDGING ABILITIES of STOCKS, GOLD, and REAL ESTATE FUNDS AGAINST INFLATION DURING COVID-19: EVIDENCE FROM TÜRKİYE

Abstract

The global economy is struggling with many challenges which started with the recession caused by the COVID-19 disease and continued with the high inflation problem. Investors seek safe havens in crisis periods and among many investment tools, real estate has always been an attractive tool to protect the purchasing powers of investors under high inflationary periods. By using Gultekin approach derived from the Fama-Schwert regression model, this study investigates the hedging ability of the Real Estate Investment Trusts and the Real Estate Investment Funds in Türkiye during the COVID-19 pandemic period (January 2020-December 2021). Additionally, the T-REIT Index, Istanbul Stock Exchange (BIST) 100 Index and gold (ounce/USD) and (gram/TL) were also analyzed in the study as benchmark tools. T-test, Jarque-Bera (1980), and Breusch-Pagan (1979) tests were used to validate the regression models. The results of the research revealed that only 4 of 33 T-REITs and 1 of 15 T-REIFs provided a hedge against inflation, while gold, BIST 100 and the T-REIT index did not have the statistical hedging ability during the COVID-19 period. The results of the research exhibited that, there are very few hedging tools under high inflation, and as a result, the purchasing powers of people are decreasing. Hence, the Central Bank of Türkiye Republic should seriously focus on fighting against inflation. Based on the reviewed past literature, this study seems to be the first research that seeks the hedging ability of the Turkish real estate capital market instruments in the COVID-19 period.