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Monetary Policy, Term Structure and Asset Return: Comparing REIT, Housing and Stock

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  • Chang, Kuang-Liang
  • Chen, Nan-Kuang
  • Leung, Charles Ka Yui

Abstract

This paper confirms that a regime-switching model out-performs a linear VAR model in terms of understanding the system dynamics of asset returns. Impulse responses of REIT returns to either the federal funds rate or the interest rate spread are much larger initially but less persistent. Furthermore, the term structure acts as an amplifier of the impulse response for REIT return, a stabilizer for the housing counterpart under some regime, and, perhaps surprisingly, almost no role for the stock return. In contrast, GDP growth has very marginal effect in the impulse response for all assets.

Suggested Citation

  • Chang, Kuang-Liang & Chen, Nan-Kuang & Leung, Charles Ka Yui, 2009. "Monetary Policy, Term Structure and Asset Return: Comparing REIT, Housing and Stock," MPRA Paper 23514, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:23514
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    More about this item

    Keywords

    monetary policy; yield curve; REITs; house prices; Markov Regime Switching;
    All these keywords.

    JEL classification:

    • R21 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Housing Demand
    • E40 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - General
    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • R33 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Nonagricultural and Nonresidential Real Estate Markets

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