On the Dynamics of International Real Estate Investment Trust Propagation Mechanisms: Evidence from Time-Varying Return and Volatility Connectedness Measures

In this paper we investigate the time-varying interconnectedness of international REIT markets using daily REIT prices in eleven major REIT countries since the Global Financial Crisis. We construct dynamic total, net total and net pairwise return and volatility connectedness measures to better understand systemic risk and the transmission of shocks across REIT markets. Our findings show that REIT market interdependence is dynamic and increases signicantly during times of heightened uncertainty including the COVID-19 pandemic. We also find that the US REIT market alongside with major European REITs are generally sources of shocks to Asian-Pacific REIT markets. Furthermore, US REITs appear to dominate European REITs. US and to a lesser extent European REITs are generally affected from cross market shocks. These findings highlight that portfolio diversification opportunities decline during times of market uncertainty.