Macroeconomic risks and REITs returns: A comparative analysis

Katlego Kola and Odongo Kodongo

Research in International Business and Finance, 2017, vol. 42, issue C, 1228-1243

Abstract: We study the relationship between the excess returns of REITs and volatilities of macroeconomic factors in developing markets (Bulgaria and South Africa) and a ‘benchmark’ developed market (USA). As expected, our results generally indicate that conditional volatilities of macroeconomic risks, extracted through the GARCH (1,1) process, are time-varying. GARCH coefficients are largely significant for excess returns and retained principal components implying conditional time-varying volatility. We use the GMM to examine the linkage between volatilities of macroeconomic variables and REITs returns. The general result here is that macroeconomic risk cannot explain excess returns on REITs. However, we document a positive relationship between variability in REITs returns and the real economy for the US. US REITs portfolio managers and investors should be wary of fluctuations in these variables as they may accentuate volatility in REITs returns.

Keywords: REITs returns; Macroeconomic risks; Conditional volatility (search for similar items in EconPapers)
JEL-codes: R33 R39 (search for similar items in EconPapers)
Date: 2017
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Citations: View citations in EconPapers (5)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:riibaf:v:42:y:2017:i:c:p:1228-1243

DOI: 10.1016/j.ribaf.2017.07.061

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