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Article

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

by 1, 2,* and 3,4,5
1
Department of Economics, University of Pretoria, Pretoria 0002, South Africa
2
KLASMOE & School of Mathematics and Statistics, Northeast Normal University, Changchun 130024, China
3
Department of Finance, Fintech Center, and Big Data Research Center, Asia University, Taichung 41354, Taiwan
4
Department of Medical Research, China Medical University Hospital, Taichung 40402, Taiwan
5
Department of Economics and Finance, The Hang Seng University of Hong Kong, Shatin 999077, Hong Kong, China
*
Author to whom correspondence should be addressed.
Sustainability 2019, 11(10), 2776; https://doi.org/10.3390/su11102776
Received: 29 March 2019 / Revised: 2 May 2019 / Accepted: 9 May 2019 / Published: 15 May 2019
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. View Full-Text
Keywords: change-point VAR model; macroeconomic shocks; US REITs sector change-point VAR model; macroeconomic shocks; US REITs sector
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MDPI and ACS Style

Gupta, R.; Lv, Z.; Wong, W.-K. Macroeconomic Shocks and Changing Dynamics of the U.S. REITs Sector. Sustainability 2019, 11, 2776. https://doi.org/10.3390/su11102776

AMA Style

Gupta R, Lv Z, Wong W-K. Macroeconomic Shocks and Changing Dynamics of the U.S. REITs Sector. Sustainability. 2019; 11(10):2776. https://doi.org/10.3390/su11102776

Chicago/Turabian Style

Gupta, Rangan, Zhihui Lv, and Wing-Keung Wong. 2019. "Macroeconomic Shocks and Changing Dynamics of the U.S. REITs Sector" Sustainability 11, no. 10: 2776. https://doi.org/10.3390/su11102776

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