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Quantile Effects of Climate Policy Uncertainty, Economic Policy Uncertainty, and Interest Rates on REIT Returns: Evidence From the United States

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  • Provash Kumer Sarker
  • Xihui Haviour Chen

Abstract

We investigate the quantile effects of climate policy uncertainty (CPU) on real estate investment trusts (REITs) returns in the United States. We use the quantile autoregressive distributed lags (QARDL) method on the monthly economic policy uncertainty (EPU), the market volatility index (VIX) and interest rates (INT) from March 2006 to April 2023. The results show that the impact coefficients of CPU, EPU and interest rates on REIT returns are significant in the short and long term. In addition, CPU demonstrates unidirectional causality with REIT returns across all quantiles, whereas REITs only show unidirectional causality with CPU in lower quantiles. Furthermore, EPU and interest rates show bidirectional causality with REIT returns across most quantiles. Policymakers and REIT investors can utilise the relationships and causality between REITs and CPU to update REIT investments, hedge against CPU and REIT stocks, construct a diversified portfolio and make informed decisions about the price movements of REITs in climate crises.

Suggested Citation

  • Provash Kumer Sarker & Xihui Haviour Chen, 2025. "Quantile Effects of Climate Policy Uncertainty, Economic Policy Uncertainty, and Interest Rates on REIT Returns: Evidence From the United States," Economic Notes, Banca Monte dei Paschi di Siena SpA, vol. 54(2), July.
    • Handle: RePEc:bla:ecnote:v:54:y:2025:i:2:n:e70012
    DOI: 10.1111/ecno.70012
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