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Time-varying Macroeconomic Risk of Real Estate Returns

Author

Listed:
  • Tim A. Kroencke
  • Felix Schindler
  • Bertram I. Steininger

Abstract

Macroeconomic risks have a huge effect on the economy in general and on both stock and real estate market in particular. Studies assume that across all U.S. stocks around 60% of the cumulative annual excess returns are earned on announcement days of important macroeconomic factors. However, according to the efficient-market hypothesis, in the majority of cases the surprise component -- the unexpected part -- of macroeconomic news should have an influence on the daily excess returns. We find that real estate returns are much less exposed to the risk of macroeconomic announcement days than stocks and bonds in the U.S. In the U.K., we are not able to find statistically significant differences of the daily excess returns for stocks, bonds, or real estate. Digging deeper, we find that mostly surprise components of retail sales and unemployment rate are statistically significant linked with real estate returns. Nonetheless their impact changed after 2009 and their signs are different in the U.S. and the U.K. Properties in the U.K. show a negative link to unexpected inflation over the whole sample, whereas in the U.S., this only partly applies before 2009.

Suggested Citation

  • Tim A. Kroencke & Felix Schindler & Bertram I. Steininger, 2016. "Time-varying Macroeconomic Risk of Real Estate Returns," ERES eres2016_161, European Real Estate Society (ERES).
    • Handle: RePEc:arz:wpaper:eres2016_161
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    File URL: https://eres.architexturez.net/doc/oai-eres-id-eres2016-161
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    Citations

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    Cited by:

    1. Wendy Nyakabawo & Rangan Gupta & Hardik A. Marfatia, 2018. "High-Frequency Impact of Monetary Policy and Macroeconomic Surprises on US MSAs and Aggregate US Housing Returns and Volatility: A GJR-GARCH Approach," Working Papers 201817, University of Pretoria, Department of Economics.
    2. Marfatia, Hardik A. & Gupta, Rangan & Cakan, Esin, 2017. "The international REIT’s time-varying response to the U.S. monetary policy and macroeconomic surprises," The North American Journal of Economics and Finance, Elsevier, vol. 42(C), pages 640-653.
    3. Nazlioglu, Saban & Gupta, Rangan & Gormus, Alper & Soytas, Ugur, 2020. "Price and volatility linkages between international REITs and oil markets," Energy Economics, Elsevier, vol. 88(C).
    4. Henryk Gurgul & Christoph Mitterer & Tomasz Wójtowicz, 2021. "The Impact of US Macroeconomic News on the Prices of Single Stocks on the Vienna Stock Exchange," Central European Journal of Economic Modelling and Econometrics, Central European Journal of Economic Modelling and Econometrics, vol. 13(3), pages 287-329, September.
    5. Wendy Nyakabawo & Rangan Gupta & Hardik A. Marfatia, 2018. "High Frequency Impact Of Monetary Policy And Macroeconomic Surprises On Us Msas, Aggregate Us Housing Returns And Asymmetric Volatility," Advances in Decision Sciences, Asia University, Taiwan, vol. 22(1), pages 204-229, December.

    More about this item

    JEL classification:

    • R3 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location

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