This paper investigates the impact of ECB monetary policy shocks on the return volatility of German real estate investment trusts (G-REITs) by applying two Markov Switching models. The results suggest that the G-REIT returns are susceptible to ECB short-term monetary policy shocks. Most importantly, this study shows that REIT returns can have more than two optimal states (booms and busts) under the Markov Switching models, rejecting the widespread assumption that REITs have only booms and busts in the previous literature.
Important Note:
- I uploaded the python source code to accomplish the Markov Switching models with external data files.
- The paper will not be published on this github repo due to Intellectural Property Agreement with University of Cambridge.