Economic Policy Uncertainty and the Co-Movement between REITs and Exchange Rate

Abstract

The REITs market has attracted a lot of interest among the academic, policymakers, and market participants. The linkages between REITs and macroeconomic and financial variables have been adequately explored in the literature, with more emphasis on linear models. This study expands the frontier of knowledge by examining the role of uncertainty in the comovement/spillover between REITs and the currency markets. Some interesting results were observed. First, using the Diebold and Yilmaz (2012) spillover test, we find that there is strong connectedness between the REITs and currency markets. Second, the BDS test shows that nonlinearity is a very crucial factor to be put into consideration when examining the role of EPU in affecting the interactions between REITs and exchange rate markets. Third, the non-parametric causality-in-quantile test confirms that the connectedness between the markets and EPU is stronger around the lower and middle quantiles. These results have important policy implications for policymakers and market participants. The study also offers suggestions for future research.

Asymmetric volatility transmission and hedging strategies among REIT, stock, and oil markets

“…In this respect, an increasing empirical literature explores the linkage between the REIT market and other financial markets, such as oil (Fasanya & Oyewole, 2023; Mensi, Nekhili, & Kang, 2022; Mensi, Reboredo, et al, 2022; Nazlioglu et al, 2016), gold (Chan et al, 2011; Mensi, Reboredo, et al, 2022; Yunus, 2020), bond (Chan et al, 2011; Raza et al, 2018; Yunus, 2020), foreign exchange (Ijasan et al, 2021; Raheem et al, 2022), and stock (Caporin et al, 2021; Chan et al, 2011; Yunus, 2020) markets. For example, Nazlioglu et al (2016) examine the impacts of crude oil price shocks on the performance of six major REITs namely Residential, Hotel, Healthcare, Retail, Mortgage, and Warehouse/Industrial REITs as well as the causalities among these markets.…”

Revisiting Interest Rate – Exchange Rate Dynamics in South Africa: How Relevant is Pandemic Uncertainties?

“…Ranging from preventive measures such as social distancing, self-isolation, and travel restrictions; this pandemic has large macroeconomic consequences such as a high unemployment rate, reduced manufacturing activities, constrained global demand & trade including tourism (Haroon & Rizvi, 2020;Nicola et al, 2020;Shen et al, 2020;Batool et al, 2021;Fasanya, Adekoya, et al, 2022;Karbassi Yazdi et al, 2022). The pandemic has significantly affected the energy & commodity markets Shen et al, 2020;Fasanya, Oyewole, & Odei-Mensah, 2021;Fasanya, Oyewole, & Oliyide, 2021;Periola-Fatunsin et al, 2021), foreign exchange market (see Narayan, 2020;Fasanya, Oyewole, Adekoya, et al, 2021), stock markets (Al-Awadhi et al, 2020;Baker et al, 2020;Fasanya, Oyewole, & Oliyide, 2021;Fasanya, Periola, et al, 2022), as well as policy uncertainties (see Al-Yahyaee et al, 2020;Raheem et al, 2022). The policy response to external shocks emanating from the financial crisis or infectious disease pandemics, such as the current Covid-19 pandemic crisis needs to be informed by the peculiar response of the economy to such shocks.…”