Macroeconomic Shocks and Changing Dynamics of the U.S. REITs Sector

Abstract

Unlike the existing literature, which primarily studies the impact of only monetary policy shocks on real estate investment trusts (REITs), this paper develops a change-point vector autoregressive (VAR) model and then analyzes, for the first time, regime-specific impact of demand, supply, monetary policy, and spread yield shocks, identified using sign-restrictions, on US REITs returns. The model first isolates four major macroeconomic regimes in the US since the 1970s and discloses important changes to the statistical properties of REITs returns and its responses to the identified shocks. A variance decomposition analysis revealed aggregate supply shocks to have dominated in the early part of the sample period, and monetary policy and spread shocks at the end. Our results imply that ignoring other possible shocks in the model is likely to lead to incorrect inferences, and over-reliance on (conventional) monetary policy in correcting for possible bubbles in the REITs sector, which it will fail to rectify, given the importance of other shocks driving the REITs sector.

Price and volatility linkages between international REITs and oil markets

“…However, just like any other security, as the financial integration goes up, the importance of cross-market interactions also become increasingly significant for the investors. Furthermore, the real estate market having played a significant role during the most recent global financial crisis, and the REIT market being a good proxy for the overall real estate sector (Akinsomi et al, 2016), policy makers also have a vested interest in understanding the drivers of these markets (Gupta and Marfatia, 2018;Gupta et al, 2019).…”

Could Mergers Become More Sustainable? A Study of the Stock Exchange Mergers of NASDAQ and OMX

“…This paper investigates the stock exchange merger of NASDAQ with OMX and examines the sustainability of co-movement between the stock markets of OMX and NASDAQ, that could affect investors' profit and decision making in their investment, changing their trading strategies, and could affect market efficiency and create arbitrage opportunity, anomaly, and additional risk. Thus, extension of our paper could include studying co-movement of other series [55,[58][59][60][61][62][63][64][65][66][67][68][69][70][71], co-movement of using different trading strategies [47,[72][73][74][75], co-movement of making use of different anomalies [76][77][78], co-movement of investing in different markets [60,64,[79][80][81][82], sustainability of making use of different market conditions [66,83], and co-movement in different types of risk [84][85][86][87][88][89][90][91][92][93][94][95]…”

The Three Musketeers Relationships between Hong Kong, Shanghai and Shenzhen Before and After Shanghai–Hong Kong Stock Connect

“…It is suggested here that This paper studies sustainability of financial integration among Shenzhen, Shanghai, and Hong Kong stock markets. An extension of our paper could study sustainability of other aspects of financial markets, for example, sustainability in warrant markets [48], sustainability in REITs [49], sustainability in equity return dispersion and stock market volatility [50], sustainability in herding behaviour [51], sustainability in portfolio selection [52], and sustainability in credit risk [53]. This paper studies sustainability of financial integration among Shenzhen, Shanghai, and Hong Kong stock markets.…”