MACROECONOMIC NEWS ANNOUNCEMENTS AND REIT RETURNS

Abstract

In this paper, ordinary least squares (OLS) test is applied to examine which unexpected news events among announcement surprise of Fed Funds Rate decided by FOMC meetings, Unemployment Rate change by BLS, Personal Income by BEA, and Industrial Production by Federal Reserve can explain movements in REIT returns. The results support the Efficient Market Hypothesis for the period from 2001 to prior 2007, in which the expected parts of the announcements play no statistical significant role in affecting REIT returns. Among four variables, REIT returns response only to the news announcement surprise of Fed Funds Rate and Industrial Production, with the negative responses as expected. However, the relation between returns and unexpected changes in macroeconomic conditions is confirmed and therefore would be useful due to its importance in financial decision making such as portfolio allocation, risk management and asset pricing purposes.