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

26 Pages Posted: 28 Mar 2012 Last revised: 10 Sep 2012

See all articles by Randy I. Anderson

Randy I. Anderson

University of Central Florida

Vaneesha Boney

University of Denver

Hany Guirguis

Manhattan College

Date Written: March 27, 2012


This paper demonstrates that the effects of unanticipated monetary policy changes (shocks) on real estate investment trust (REIT) returns are asymmetric between the high- and low-variance regimes. A Markov regime-switching model with error correction terms is used 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. Furthermore, monetary shocks have about twice as much effect on REITs as they do on the S&P 500 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. REITs are an important and independent test case for research into the impact of monetary shocks.

Keywords: Monetary Policy, REITs, Asymmetric Response, Markov Process

Suggested Citation

Anderson, Randy I. and Boney, Vaneesha and Guirguis, Hany, The Impact of Switching Regimes and Monetary Shocks: An Empirical Analysis of REITs (March 27, 2012). Journal of Real Estate Research, Vol. 34, No. 2, 2012, Available at SSRN:

Randy I. Anderson (Contact Author)

University of Central Florida ( email )

4000 Central Florida Blvd
Orlando, FL 32816-1400
United States

Vaneesha Boney

University of Denver ( email )

2101 S University Blvd
Denver, CO 80208
United States
303-871-2299 (Phone)

Hany Guirguis

Manhattan College ( email )

Manhattan College Parkway
Riverdale, NY 10471
United States

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Abstract Views
PlumX Metrics