Abstracts for Vol.
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This paper explores the relationship between the macroeconomy and real estate returns. These residuals, known as extra-market covariance, are used in the analysis since this technique controls for the covariance between equity REIT returns and the overall stock market. Thus, the residuals represent pure industry effects. The residuals are then employed in an unrestricted vector autoregressive model with the macroeconomic variables to test for relationships. The results show that prices, nominal rates, output, and investment all directly influence the real estate series.