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On REIT Returns and (Un-) Expected Inflation: Empirical Evidence Based on Bayesian Additive Regression Trees

Author

Listed:
  • Christian Pierdzioch

    (Department of Economics, Helmut Schmidt University, Germany)

  • Marian Risse

    (Department of Economics, Helmut Schmidt University, Germany)

  • Rangan Gupta

    (Department of Economics, University of Pretoria, Pretoria)

  • Wendy Nyakabawo

    (Department of Economics, University of Pretoria, Pretoria)

Abstract

We use Bayesian Additive Regression Trees (BART) to study the comovement of REIT returns with expected and unexpected inflation. Our finding show that the two inflation components are not among the leading predictors of REIT returns in terms of their relative importance, but also that the explanatory power of the two inflation components for REIT returns changed over time. REIT returns exhibit an asymmetric response to unexpected inflation, a phenomenon mainly concentrated in the Greenspan era.

Suggested Citation

  • Christian Pierdzioch & Marian Risse & Rangan Gupta & Wendy Nyakabawo, 2016. "On REIT Returns and (Un-) Expected Inflation: Empirical Evidence Based on Bayesian Additive Regression Trees," Working Papers 201677, University of Pretoria, Department of Economics.
    • Handle: RePEc:pre:wpaper:201677
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    References listed on IDEAS

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    22. Marc Simpson & Sanjay Ramchander & James Webb, 2007. "The Asymmetric Response of Equity REIT Returns to Inflation," The Journal of Real Estate Finance and Economics, Springer, vol. 34(4), pages 513-529, May.
    23. Chang, Kuang-Liang, 2017. "Does REIT index hedge inflation risk? New evidence from the tail quantile dependences of the Markov-switching GRG copula," The North American Journal of Economics and Finance, Elsevier, vol. 39(C), pages 56-67.
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    Cited by:

    1. Das, Mahamitra & Sarkar, Nityananda, 2017. "Re-investigating the anomalous relationship between inflation and equity REIT returns: A regime-switching approach," MPRA Paper 95135, University Library of Munich, Germany, revised 05 Nov 2018.
    2. Christou, Christina & Gupta, Rangan & Nyakabawo, Wendy & Wohar, Mark E., 2018. "Do house prices hedge inflation in the US? A quantile cointegration approach," International Review of Economics & Finance, Elsevier, vol. 54(C), pages 15-26.
    3. Das, Mahamitra & Sarkar, Nityananda, 2019. "Revisiting the Anomalous Relationship between Inflation and REIT Returns in Presence of Structural Breaks: Empirical Evidence from the USA and the UK," MPRA Paper 95130, University Library of Munich, Germany, revised 05 Nov 2019.
    4. Shi, Qi, 2023. "The RP-PCA factors and stock return predictability: An aligned approach," The North American Journal of Economics and Finance, Elsevier, vol. 64(C).
    5. Bouri, Elie & Nekhili, Ramzi & Kinateder, Harald & Choudhury, Tonmoy, 2023. "Expected inflation and U.S. stock sector indices: A dynamic time-scale tale from inflationary and deflationary crisis periods," Finance Research Letters, Elsevier, vol. 55(PA).

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    More about this item

    Keywords

    REIT returns; BART modeling; Inflation;
    All these keywords.

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • R30 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - General

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