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On the connection between international REITs and oil markets: The role of economic policy uncertainty

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  • Fasanya, Ismail O.
  • Oyewole, Oluwatomisin J.

Abstract

The interconnection between the international Real Estate Investment Trust (REITs) and oil markets has attracted much interest among investors, policymakers, practitioners, and academics. The focus of this paper is to examine the role of US economic policy uncertainty on the connection between international REITs and oil markets. The following findings are perceptible from our analyses. First, the spillover tests show a significantly high level of connection between the two markets. Second, the spillover results also reveal that the oil market is a net receiver of the shocks, while most REIT markets are net transmitters of the volatility. Third, the BDS test shows strong evidence that nonlinearity is crucial when examining policy uncertainty's role in affecting the interactions between REITs and oil markets. Fourth, the non-parametric causality-in-quantile test confirms that the connectedness between economic policy uncertainty and the link between REITs and oil markets is stronger, mostly around the lower and median quantiles. These results have important policy implications for policymakers and market participants.

Suggested Citation

  • Fasanya, Ismail O. & Oyewole, Oluwatomisin J., 2023. "On the connection between international REITs and oil markets: The role of economic policy uncertainty," Resources Policy, Elsevier, vol. 81(C).
    • Handle: RePEc:eee:jrpoli:v:81:y:2023:i:c:s0301420723000430
    DOI: 10.1016/j.resourpol.2023.103335
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    2. Abdullah, Mohammad & Adeabah, David & Abakah, Emmanuel Joel Aikins & Lee, Chi-Chuan, 2023. "Extreme return and volatility connectedness among real estate tokens, REITs, and other assets: The role of global factors and portfolio implications," Finance Research Letters, Elsevier, vol. 56(C).

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    More about this item

    Keywords

    REITs-oil nexus; Economic policy uncertainty; Spillovers; Nonlinearity; Causality-in-quantiles;
    All these keywords.

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • C53 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Forecasting and Prediction Models; Simulation Methods
    • Q02 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - General - - - Commodity Market
    • R30 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - General

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