My new publication on REIT's

A new publication of yours truly came out yesterday on a very good journal.

It is available online for the next 50 days only :

It is about International Real Estate Investment Trusts (REITs) stock returns of 8 countries* and  US monetary policy and macroeconomic news surprises** effect on these returns (since U.S. economic and policy developments have played a central role both in international portfolio management as well as broader economic policy making).

We, instead of a constant parameter estimation, adopt a time-varying parameter (TVP) framework, which is the contribution of the paper in terms of modeling to the literature. This framework provides a flexible way to uncover the impact of monetary policy and macroeconomic surprises on the REIT returns across the world.

Findings are summarized below:

The evidence clearly suggests that there are significant structural changes in the way the U.S. developments impact international real estate markets. In particular, there is wide variation across time in the response of the REIT stocks to the unexpected movement in the U.S. monetary policy, inflation, and employment conditions. In the case of the Fed’s policy shocks, the impact on the international REITs is driven by the signaling effect as well as through the classic asset price channel of the monetary policy transmission of shocks. The adopted framework precisely traces the relative role of these two channels over time. In the case of the unexpected movements in the U.S. inflationary conditions, evidence suggests that the inflation-hedging ability of REIT index is not constant across time. We also find wide time variation in the response of REIT stock to unexpected changes in the U.S. employment conditions. Further, there is strong evidence of connections between the extent of stock market penetration in the economy and the time-varying response patterns of the international REIT stocks.



*: 8 countries  included in the paper constitute 88.3% of the global REIT index based on market capitalization which includes Australia (7.47%), Belgium (0.57%), Canada (2.95%), France (1.93%), Japan (7.43%), Netherlands (2.64%), New Zealand (0.12%), and the U.S. (65.19%) (European Public Real Estate Association, 2016 and Ntuli & Akinsomi, 2016). Thus, the selected countries constitute the top 10 REITs market with the exclusion of the U.K, Hong Kong, Singapore but with the inclusion of Belgium and New Zealand (Ntuli & Akinsomi, 2016).

**: We obtain the macroeconomic announcements related to the U.S. inflation and unemployment rates from the websites of the Bureau of Economic Analysis (BEA) and the Bureau of Labor Statistics (BLS), respectively. Data on market expectations of the unemployment and inflation rates for the period between 1994 to 2005 are obtained from the Money Market Survey. For the remaining sample period from 2005 to 2016, we obtain these data from the Bloomberg Survey extracted from the Bloomberg terminal. The monetary policy surprise is computed from the 30-day Federal funds futures market contracts that most closely track the effective overnight Federal funds rate for a specific month.

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