Research On The Impact Of Exchange Rate And Inflation Rate On The Return Of Commercial Real Estate Asset Securitization Products

This paper studies the related factors of the yield of commercial real estate asset securitization products.Regarding the poor liquidity of commercial real estate assets,the large amount of capital demand and the difficulty of asset management,this paper systematically conduct various factors affecting the yield of commercial real estate asset securitization products by development of foreign mature markets and related literature.In recent years,the rapid development of China's commercial real estate market and the emergence of a series of commercial real estate asset securitization products,such as Gaohe Kaichen CMBS,Xinjie Gaohe REITs,Red Star Macalline Furnishing REITs,and Xinpai Apartments REITs,etc.have paved the way for the domestic launch of REITs.China has now entered a transition period from alike REITs to REITs.Factors such as inflation rate and exchange rate may be key variables affecting the development of commercial real estate asset securitization products.This paper focuses on the impact of multi-factors on the U.S.REITs and the index of Chinese commercial real estate listed companies,along with the impact of exchange rate and inflation rate on the yield of commercial real estate asset securitization products.The multi-factor pricing model is used to study the impact of yield factors on the US REITs and the index of Chinese commercial real estate listed companies.Principal components analysis is employed to extract the principal components of macroeconomic factors.Then these principal components and yield sequences are modeled by GARCH(1,1).It is found that their conditional variances change with time.On this basis,the GMM method is used to estimate the impact of the income impact variable on the real estate listed company's income index and REITs excess return.The empirical results show that any macroeconomic risk factors on the excess returns of both Chinese real estate stock price index and the US REITs excess return were not significantly influenced.However,the empirical results from variance equations show that the index of industrial production,inflation and interest rates positively effect the condition variance of REITs yield in the United States;the GDP growth rate,inflation rate and exchange rate have positive impact on the conditional variance of real estate stock price return index in China.Under Fama-French three-factor framework,a multi-factor asset pricing model which characterizes the impact of exchange rate changes on the return of REITs is constructed,and then it empirically analyses the impact of exchange rate changes on the return of two types of assets by utilizing the US REITs market data and Chinese commercial real estate listed companies data respectively.Through the empirical analysis of the proxy variables and various types of REITs in the U.S.market,the results show that the REITs yield is significantly negatively correlated with the appreciation of the US dollar.However,once the type of REITs differs from the type of property invested by REITs,there exists significant differences in their exchange rate risk exposures.The empirical results of the Chinese market are similar to those of the United States.The results using three exchange rate variables as porxy variables show that the appreciation of RMB has a significant negative impact on the real estate stock returns,and the robust test based on feasible generalized least squares regression further verifies the above conclusions.The correlation measure model based on ARMA-EGARCH-GRG Copula is constructed to test the correlation between the return of both Chinese real estate stock price index and American REITs,and inflation under different quantiles.In the empirical model,ARMA(m,n)-EGARCH(1,1)-t model is used to model the edge distribution of financial time series,and then the Markov-switching GRG Copula-based method is employed to measure the correlation between variables.The empirical results show that,in the two state Markov-switching,there exist positive and negative tail correlations between the U.S.REITs returns and inflation rate from January 2001 to December 201 7.In general non-extreme conditions,two kinds of correlation still exists between the two,where the positive correlation is more likely to occur.Unlike the U.S.market,under two states of Markov conversion,the real estate stock price index returns have a positive tail dependence with inflation rate from January 2000 to August 2017 in China.Even in the non-extreme general situation,the possibility of maintaining a positive correlation between the return of Chinese real estate index and inflation rate is far greater than that in the United States.From a long term investment perspective,REITs is a financial tool that can effectively hedge against inflation.Overall,the above results on the impact of macroeconomic factors on the yield of commercial real estate asset securitization products will provide important references for China to launch REITs products at the right time and formulate relevant policies,and provide valuable guidance for investors with REITs investment decisions.