Do Oil-price Shocks Predict the Realized Variance of U.S. REITs?

Matteo Bonato, Oguzhan Cepni, Rangan Gupta, Christian Pierdzioch

Research output: Working paperResearch


We examine, using aggregate and sectoral U.S. data for the period 2008−2020, the predictive power of disentangled oil-price shocks for Real Estate Investment Trusts (REITs) realized market variance via the heterogeneous auto-regressive realized variance (HAR-RV) model. In-sample tests show that demand and financial-market risk shocks contribute to a larger extent to the overall fit of the model than supply shocks, where the in-sample transmission of the impact of the shocks mainly operates through their significant effects on realized upward (“good”) variance. Out-of-sample tests corroborate the significant predictive value of demand and risk shocks for realized variance and its upward counterpart at a short, medium, and long forecast horizon, for various recursive-estimation windows, for realized volatility (that is, the square root of realized variance), for a shorter sub-sample period that excludes the recent phase of exceptionally intense oil-market turbulence, and for an extended benchmark model that features realized higher-order moments, realized jumps, and a leverage effect as control variables.
Original languageEnglish
PublisherUniversity of Pretoria
Number of pages26
Publication statusPublished - Nov 2020
SeriesWorking Paper Series / Department of Economics. University of Pretoria


  • Oil price
  • Shocks
  • REITs
  • Realized variance
  • Forecasting

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