Quantile Spillovers and Connectedness Between Real Estate Investment Trust, the Housing Market, and Investor Sentiment

Elroi Hadad (), Thai Hong Le and Anh Tram Luong
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Elroi Hadad: Department of Industrial Engineering and Management, Sami Shamoon College of Engineering, 56 Bialik St., Beer Sheva 8410802, Israel
Thai Hong Le: VNU University of Economics and Business, Vietnam National University, Hanoi 1000000, Vietnam
Anh Tram Luong: VNU University of Economics and Business, Vietnam National University, Hanoi 1000000, Vietnam

IJFS, 2024, vol. 12, issue 4, 1-22

Abstract: This paper examines the quantile connectedness between Real Estate Investment Trusts (REITs), housing market sentiment, and stock market sentiment in the U.S. over the period between January 2014 and June 2022 using the quantile vector autoregression (QVAR) model. We find modest spillover effects at the median quantile (8.51%), which become more pronounced at the extreme tails (between 50.51% and 59.73%). The COVID-19 pandemic amplifies these interconnections. REITs are net receivers at the median but net transmitters at extreme quantiles, while stock market sentiment mainly transmits during normal conditions and receives in highly bullish markets. Home purchase sentiment shifts from fluctuating roles before the pandemic to being a net transmitter post-2021. Overall, negative shocks have a greater impact than positive ones, and REITs exhibit stock-like behavior. These findings underscore the importance for fund managers and investors to consider sentiment volatility in both stock and real estate markets, especially during extreme market conditions.

Keywords: quantile connectedness; REITs; investor sentiment; housing market; stock market (search for similar items in EconPapers)
JEL-codes: F2 F3 F41 F42 G1 G2 G3 (search for similar items in EconPapers)
Date: 2024
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