Revisiting REIT and Inflation Dynamics : A Regime-Switching Approach

This paper reinvestigates the existing anomalous relationship between inflation and REIT returns in the USA. To analyze it, we employ both observed and unobserved regime-switching VAR models, along with two additional variables, namely, relative price variability and output growth. We find that the relationship appears to be spurious and previously served as a proxy for the significant effect of relative price variability and output growth on REIT returns. We also identify the regime-specific dynamics between output growth and relative price variability. Finally, the resulting impulse response function show how the model variables respond to fundamental disturbances across different regimes