Risk and Return in European REIT Sectors: The Influence of Macroeconomic, Sector – Specific, and Financial Determinants : A Distributed Lag Model Approach

Sammanfattning

The following master´s thesis examines the risk-return relationship in European REIT sectors by analyzing the influence of macroeconomic, sector-specific, and financial determinants. It focuses on the Retail, Diversified, Industrial, Office, Residential, and Healthcare sectors across four major European REIT markets: Belgium, France, Spain, and the United Kingdom over the period from 2015 to 2024. This topic presents significant relevance, as the European REIT market is largely unaddressed in academic literature. Furthermore, the past decade has been shaped by various global events that have significantly impacted the REIT market, such as the COVID-19 pandemic, the Ukraine War, and high inflation rates. Hence, this thesis aims to address this gap by contributing to the limited research on how the aggressive fluctuations in the mentioned variables affected REITs across sectors and markets. This is achieved through a quantitative study, using secondary data collected from Yahoo Finance. The analysis in this study consists of descriptive statistics and a regression analysis using a Distributed Lag Model to assess the relationship between REIT returns and the determinants. This study reveals that the Industrial sector demonstrated the strongest performance, while the Diversified sector performed the worst, although it exhibited the lowest level of volatility. This study also reveals that the results of the regression analysis are largely insignificant and should therefore be interpreted with caution. However, both the unemployment rate and the VSTOXX variable exhibit a strong negative relationship with statistically significant results.