Analyzing the Determinants of U.S. REIT Return Volatility

This study examines the relationship between macroeconomic variables and the volatility of U.S. REITs, utilizing a three-step analytical process. Initially, a GARCH model was applied to estimate the return volatility of equity and mortgage-type REITs, confirming the GARCH(1, 1) model as the most suitable. Subsequently, volatility estimation data from this model were used as dependent variables in an autoregressive lagged difference model (ARDL) OLS estimation, incorporating macroeconomic indicators such as the industrial production index, consumer price index, unemployment rate, and credit spread. These variables demonstrated a time-lagged effect on price volatility. Lastly, the study utilized a Markov Switching AR (MSAR) model to differentiate the impact of these variables during periods of high and low volatility, revealing that the determinants of volatility vary significantly with the level of volatility experienced.