Geopolitical Risk and the Dynamics of REITs Returns

Alain Coen and Aurelie Desfleurs

ERES from European Real Estate Society (ERES)

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 Merton (1973)’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 significancy of the geopolitical risk metrics on the decomposition of REITs returns grouped into different portfolios ( built 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: Asset Pricing; Geopolitical Risks; Gmm; REITs (search for similar items in EconPapers)
JEL-codes: R3 (search for similar items in EconPapers)
Date: 2024-01-01
New Economics Papers: this item is included in nep-rmg
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