Geopolitical risk and the dynamics of REITs returns

Alain Coën and Aurélie Desfleurs

Finance Research Letters, 2024, vol. 64, issue C

Abstract: The aim of this study is to analyze the relative importance of geopolitical risk (GPR), as introduced by Caldara and Iacoviello (2022), on the dynamics of U.S. REITs returns. Using an extended conditional version of Fama and French (1993)’s capital asset pricing model, we highlight the role played by GPR and its two components, geopolitical acts (GPA) and geopolitical threats (GPT), on the expected returns of securitized real estate. Our robust results report the level and the significant of the geopolitical risk metrics on the decomposition of REITs returns grouped into different portfolios (from CRSP/Ziman series). We shed light on the link between the characteristics of REITs and the relative importance of geopolitical risk during the last decades.

Keywords: Geopolitical risk; REITs; Asset pricing; Multifactor models; GMM (search for similar items in EconPapers)
JEL-codes: F51 F60 G12 G15 R3 (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:64:y:2024:i:c:s1544612324004677

DOI: 10.1016/j.frl.2024.105437

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