Economic Policy Uncertainty and Real Estate Market: Evidence from U.S. REITs
Ying Zhang (yzhang1@fairfield.edu),
J. Andrew Hansz (hansz@uta.edu) and
Wikrom Prombutr (wikrom.prombutr@csulb.edu)
Additional contact information
Ying Zhang: Fairfield University
J. Andrew Hansz: The University of Texas at Arlington
Wikrom Prombutr: California State University
International Real Estate Review, 2022, vol. 25, issue 1, 55-87
Abstract:
We examine how economic policy uncertainty (EPU) affects the monthly performance of U.S. real estate investment trusts (REITs) from 1985 to 2018. First, a positive shock in EPU impairs contemporaneous REIT returns but predicts higher positive future returns. Such a return reversion has not been previously documented, and we provide some explanations. Second, although EPU can explain for the current returns of both equity and mortgage REITs, EPU is unable to predict the future returns of mortgage REITs. Third, breaking down the main EPU index into its four components, we find that the impact of EPU is primarily from the broad newspaper coverage of policy-related economic uncertainties while the other components are less influential. Our results indicate that policy uncertainty can affect the value of real estate assets, and EPU is an economically important factor for understanding and pricing REITs.
Keywords: Economic Policy Uncertainty; Real Estate Market; REITs; Causality; Forecasting (search for similar items in EconPapers)
Date: 2022
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