Employing dividend yield decomposition, this paper explores the inflation illusion and inflation hedging effects on REIT stock prices. Results show that changes in expected inflation explain a large share of the time series variation of the mispricing components of the dividend yield. Also,...

Data from the National Council of Real Estate Investment Fiduciaries (NCREIF) provide a unique setting to examine the inflation illusion hypothesis. NCREIF provides appraisal-based and transaction-based return series allowing comparison of market participants with specific valuation expertise to...