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Exchange rate exposure of REITs

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  • Ngo, Thanh

Abstract

In this paper, I examine how foreign exchange rate movements affect U.S. real estate investment trusts (REITs) returns. I document that REITs returns are adversely affected by U.S. dollar appreciation, regardless of the measurement of the exchange rate changes, of the REIT size and of macro-economic factors. The exchange rate exposures, however, vary significantly among the REIT types and REITs’ property. U.S. dollar appreciation adversely affects equity REITs returns while leaving no significant impact on mortgage REITs and hybrid REITs returns. The exchange rate exposure is especially prominent among health care, industrials-office, residential, retail and self-storage REITs. The findings unveil an important source of risk that REITs are exposed to, demanding more attention from REIT portfolio managers and investors alike.

Suggested Citation

  • Ngo, Thanh, 2017. "Exchange rate exposure of REITs," The Quarterly Review of Economics and Finance, Elsevier, vol. 64(C), pages 249-258.
    • Handle: RePEc:eee:quaeco:v:64:y:2017:i:c:p:249-258
    DOI: 10.1016/j.qref.2016.09.002
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    7. Muhammad Kashif Imran & Arifa Saeed & Safia Nosheen & Sumaira Rasheed, 2024. "Determining Performance of REIT (REIT): The Case of G-7 Economies," Bulletin of Business and Economics (BBE), Research Foundation for Humanity (RFH), vol. 13(1), pages 307-318.
    8. Yu-Min Lian & Chia-Hsuan Li & Yi-Hsuan Wei, 2021. "Machine Learning and Time Series Models for VNQ Market Predictions," Journal of Applied Finance & Banking, SCIENPRESS Ltd, vol. 11(5), pages 1-2.
    9. Benjamin Kwakye & Chan Tze Haw, 2020. "Interplay of the Macroeconomy and Real Estate: Systematic Review of Literature," International Journal of Economics and Financial Issues, Econjournals, vol. 10(5), pages 262-271.
    10. Muhammad Tahir & Haslindar Ibrahim & Abdul Hadi Zulkafli & Muhammad Mushtaq, 2020. "Influence of Exchange Rate Fluctuations and Credit Supply on Dividend Repatriation Policy of U.S. Multinational Corporations," Journal of Central Banking Theory and Practice, Central bank of Montenegro, vol. 9(special i), pages 267-290.
    11. Albulescu, Claudiu Tiberiu & Aubin, Christian & Goyeau, Daniel & Tiwari, Aviral Kumar, 2018. "Extreme co-movements and dependencies among major international exchange rates: A copula approach," The Quarterly Review of Economics and Finance, Elsevier, vol. 69(C), pages 56-69.
    12. Odusami, Babatunde O., 2021. "Volatility jumps and their determinants in REIT returns," Journal of Economics and Business, Elsevier, vol. 113(C).

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    More about this item

    Keywords

    Exchange rate risk; REITs; International finance;
    All these keywords.

    JEL classification:

    • F3 - International Economics - - International Finance
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates

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