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Revisiting the Role of Technology in the US Equity REITs-Climate Change Nexus: The GARCH-MIDAS Approach

Author

Listed:
  • Oluwaseun Ajayi
  • Kazeem O. Isah

Abstract

We investigated the role of technological innovation in the climate change-REITs nexus, considering the physical and transitional dimensions of risk posed by changing climate. Determining which dimension of climate risk is the most severe and affects the volatility of REITs is crucial. The study incorporated data from a daily market capitalisation-weighted index of U.S. equity REITs covering October 14, 2013, to December 29, 2023. The findings suggest that climate change's physical aspects heighten the volatility in the REITs market, with transitional climate risks bearing a more significant impact. Surprisingly, technology mitigates the effect of climate risk on REITs, but this reduction is more evident for transitional risks than physical ones. The paper has implications for investors, asset managers, and policymakers. Investors can utilise the research to adjust their portfolio strategies, considering climate risks and technological factors in REITs. Asset managers can refine their risk assessment frameworks for more resilient investment practices. Policymakers can use this research’s findings to develop regulations promoting climate resilience and real estate innovation.

Suggested Citation

  • Oluwaseun Ajayi & Kazeem O. Isah, 2024. "Revisiting the Role of Technology in the US Equity REITs-Climate Change Nexus: The GARCH-MIDAS Approach," AfRES afres2024-026, African Real Estate Society (AfRES).
    • Handle: RePEc:afr:wpaper:afres2024-026
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    More about this item

    Keywords

    climate change; GARCH-MIDAS; REITs; technological shocks;
    All these keywords.

    JEL classification:

    • R3 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location

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