Dynamic Risk Spillover in International Real Estate Investment Trusts: Implications for Asset Investors

The paper examines the extent of connectivity and shock transmission among twenty international public REITs using both static and dynamic econometric measures. The result shows that the dominant status of the United States REIT market as a primary source of shock to the international REIT market is in contest, mostly with the Belgian, Russian, and French REITs. Our results also indicate that Belgium, Germany, and France are the leading sources of shock in the European Union REIT market. Singapore dominates the ASEAN Economic Community REITs; the United States leads the North American Free Trade Agreement REITs while Russia and the United States compete as leaders in the Asia–Pacific Economic Cooperation REIT market. Results from the dynamic spillover demonstrate that return and the volatility spillover are vulnerable to key global news—positive or negative—with the COVID-19 pandemic having a substantial influence on international REITs than oil price shocks and geopolitical news. We further find out that altogether, the 20 international REITs are highly connected, and their level of linkages increases in periods of heightened global market uncertainties. However, the connectedness levels of the markets reduce among the economic blocs, suggesting that market integration, in the perspective of REITs, is not well-achieved under established economic groupings. We believe these findings are significant for the recalibration of the international REIT market as it resets itself from the uncertainties ushered in by the insurgency of the COVID-19 pandemic. The findings also have relevant implications for the investor community.