The Effects of Conventional and Unconventional Monetary Policy Shocks on US REITs Moments: Evidence from VARs with Functional Shocks

Shixuan Wang, Rangan Gupta, Matteo Bonato () and Oguzhan Cepni
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Matteo Bonato: Department of Economics and Econometrics, University of Johannesburg, Auckland Park, South Africa; IPAG Business School, 184 Boulevard Saint-Germain, 75006 Paris, France

No 202219, Working Papers from University of Pretoria, Department of Economics

Abstract: We use a vector autoregressive model with functional shocks, capturing the shift of the entire term structure of interest rates on monetary policy announcement dates, to empirically evaluate the effects of conventional and unconventional monetary policy decisions on the Real Estate Investment Trusts (REITs) markets of the United States (US). Using 5-minute interval intraday data, we analyze not only the impact on REITs returns, but also its realized variance (RV), realized jumps (RJ), realized skewness (RSK), and realized kurtosis (RKU) over the daily period of September 2008 to June 2021. While the effects of conventional monetary policy shocks on the moments of REITs returns tend to conform with economic theories, the same is not necessarily the case with unconventional monetary policy shocks. In addition, though monetary policy shocks have the most persistent and strongest effects on RJ, the extreme behaviour of the REITs market is also observed through RSK and RKU. Moreover, when we look into 10 REITs sectors, there are indeed heterogeneity in terms of the strength of the effect, but not so much in terms of the sign of responses of the various moments compared to the overall market. Our results have important implications for REITs market participants, given its exponential growth as an asset class.

Keywords: US REITs; Intraday Data; Higher-Moments; Conventional and Unconventional Monetary Policies; VAR with Functional Shocks (search for similar items in EconPapers)
JEL-codes: C32 E43 E52 R3 (search for similar items in EconPapers)
Pages: 42 pages
Date: 2022-04
New Economics Papers: this item is included in nep-ban, nep-cba, nep-mac and nep-mon
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Persistent link: https://EconPapers.repec.org/RePEc:pre:wpaper:202219

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