Title

The Impact of Switching Regimes and Monetary Shocks: An Empirical Analysis of REITs

Authors

Authors

R. I. Anderson; V. Boney;H. Guirguis

Comments

Authors: contact us about adding a copy of your work at STARS@ucf.edu

Abbreviated Journal Title

J. Real Estate Res.

Keywords

INTEREST-RATES; VARIANCE DECOMPOSITION; POLICY TRANSMISSION; BUSINESS-CYCLE; CREDIT CHANNEL; TIME-SERIES; RETURNS; STOCK; US; INFLATION; Business, Finance; Economics

Abstract

This paper demonstrates that the effects of unanticipated monetary policy changes (shocks) on real estate investment trust (REIT) returns are asymmetric between the high- and low-variance regimes. A Markov regime-switching model with error correction terms is used to quantify the impact of monetary shocks on seven specialized REIT indices in a sample of daily returns from 1997 to 2008. The relationship between monetary shocks and REIT returns is negative, but this relationship is significant primarily during periods of high variance. Furthermore, monetary shocks have about twice as much effect on REITs as they do on the S&P 500 Index during high-variance regimes. This asymmetric response can be attributed to the Federal Reserve's recession avoidance tactics, downward price rigidity, and the external financing premium. REITs are an important and independent test case for research into the impact of monetary shocks.

Journal Title

Journal of Real Estate Research

Volume

34

Issue/Number

2

Publication Date

1-1-2012

Document Type

Article

Language

English

First Page

157

Last Page

181

WOS Identifier

WOS:000306152200002

ISSN

0896-5803

Share

COinS