The response of real estate investment trust returns to macroeconomic shocks

Bradley T. Ewing, James E. Payne

Research output: Contribution to journalArticlepeer-review

59 Scopus citations

Abstract

To date, there has been considerable concern with evaluating the performance of real estate returns or determining the significance of fundamental state variables. This paper differs from the existing literature by identifying the response of real estate investment trust (REIT) returns to unexpected changes in the real output growth, the inflation, the default risk premium, and the stance of monetary policy utilizing the newly developed technique of generalized impulse response analysis. The generalized impulse response method does not impose a priori restrictions as to the relative importance each of these variables may play in the transmission process. The results show the extent and the magnitude of the relationship between the REIT market and macroeconomic factors. In particular, we find that shocks to monetary policy, economic growth, and inflation all lead to lower than expected returns, while a shock to the default risk premium is associated with higher future returns.

Original languageEnglish
Pages (from-to)293-300
Number of pages8
JournalJournal of Business Research
Volume58
Issue number3 SPEC. ISS.
DOIs
StatePublished - Mar 2005

Keywords

  • Macroeconomic factors
  • Real estate
  • Vector autoregression

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