Inflationary Hedging Capacity of House Price Returns in Emerging Economy of Nigeria

Abstract: Property asset as a protective devise against the risk of inflation is investigated in the Capital city of Nigeria (Abuja). Five residential housing zones were selected for the study. the general use of ordinary least squares by the previous studies has been faulted on the ground that it can only offer short term inflationary characteristics in the housing market. This study further identified inflationary hedging capacity of house return by examining both short run and long run inflationary characteristics in Abuja housing market. The study utilized Ordinary least squares (to show short run inflationary characteristics), Augmented Dicker Fuller (ADF) to test is used to test for the stationarity in the data, Engle Granger cointegration to establish long run relationships and cointegrating regression analysis to establish long run inflationary characteristics in Abuja Housing Market. The result FMOLS revealed that housing markets failed to provide a complete hedge across all the markets against dirt of inflation within a possible short run. The result of cointegating regression revealed that housing market provide a complete hedge across all the market in the long run, and the overall market influence is between 88.2%-72.1%. Keywords: House price returns, actual inflation, expected inflation, unexpected inflatio