US REITs' Returns Sensitivity to Interest Rates after the Global Financial Crisis

29 Pages Posted: 26 Jul 2017

See all articles by Giacomo Morri

Giacomo Morri

SDA Bocconi School of Management

Wenwen Liu

Bocconi University

Date Written: July 24, 2017


Purpose: This paper investigates whether US REITs’ returns have been sensitive to the monetary policy introduced after the Global Financial Crisis of 2008.

Design/methodology/approach: For the period from 1995 to 2015, we tested the correlation between US REITs’ returns and interest rates, since the central banks commonly use interest rates as a tool to implement their policy. Then, using three sub-periods, we observed how the sensitivity of US REITs to interest rates changed according to the different economic environments. Using two risk factors — the stock market and the changes in long-term interest rates — we created a multifactor model based around the classical CAPM (Sharpe, 1964) and an elaboration of intertemporal CAPM (Merton, 1973).

Findings: We found that the stock market was statistically significant for all subperiods considered, and changes in long-term interest rates were statistically significant only for the subperiod 2009–2015. We also found that an increase in 10-year US Treasuries’ yields corresponded to a decrease in US REITs’ market returns.

Practical implications: Our findings confirm the sensitivity of US REITs’ performance under post-crisis monetary policy and suggest that the monetary policy has been successful in sensitizing the real estate market and improving its performance after lowering interest rates.

Originality/value: The paper provides a further evidence of the sensitivity of indirect real estate investment to interest rates variation during a period of economic turmoil.

Keywords: US REITs, Monetary Policy, Quantitative Easing, Real Estate, Interest Rates Policy, Financial Crisis

JEL Classification: G01

Suggested Citation

Morri, Giacomo and Liu, Wenwen, US REITs' Returns Sensitivity to Interest Rates after the Global Financial Crisis (July 24, 2017). Available at SSRN: or

Giacomo Morri (Contact Author)

SDA Bocconi School of Management ( email )

Via Bocconi 8
Milan, Milan 20136


Wenwen Liu

Bocconi University ( email )

Via Sarfatti, 25
Milan, MI 20136

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