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The Impact of Switching Regimes and Monetary Shocks: An Empirical Analysis of REITs


  • Randy I. Anderson

    () (University of Central Florida)

  • Vaneesha Boney

    () (Daniels College of Business)

  • Hany Guirguis

    () (Manhattan College)


This paper demonstrates that the effects of unanticipated monetary policy changes (shocks) on REIT returns are asymmetric between the high- and low-variance regimes. We utilize a Markov regime-switching model with error correction terms to quantify the impact of monetary shocks on seven specialized REIT indices in a sample of daily returns from 1997 to 2008. The relationship between monetary shocks and REIT returns is negative, but this relationship is significant primarily during periods of high variance, namely the current recession and recent crisis events. Furthermore, monetary shocks have about twice as much effect on REITs as they do on the SP500 index during high-variance regimes. This asymmetric response can be attributed to the Fed’s recession avoidance tactics, downward price rigidity, and the external financing premium. Given their unique regulatory and operating characteristics, REITs are an important and independent test case for ongoing research into the impact of monetary shocks.

Suggested Citation

  • Randy I. Anderson & Vaneesha Boney & Hany Guirguis, 2012. "The Impact of Switching Regimes and Monetary Shocks: An Empirical Analysis of REITs," Journal of Real Estate Research, American Real Estate Society, vol. 34(2), pages 157-182.
  • Handle: RePEc:jre:issued:v:34:n:2:2012:p:157-182

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    References listed on IDEAS

    1. Gordon, Paul J., 1986. "What do professors do?," Business Horizons, Elsevier, vol. 29(3), pages 38-43.
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    Cited by:

    1. Viktoriya Lantushenko & Edward Nelling, 2017. "Institutional Property-Type Herding in Real Estate Investment Trusts," The Journal of Real Estate Finance and Economics, Springer, vol. 54(4), pages 459-481, May.

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    JEL classification:

    • L85 - Industrial Organization - - Industry Studies: Services - - - Real Estate Services


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