Transitory and permanent shock transmissions between real estate investment trusts and other assets: Evidence from time‐frequency decomposition and machine learning

Abstract We evaluate asset returns and volatility connectedness using the time‐frequency model machine learning approaches. Using 48 years of monthly indices equity real estate investment trusts (EREITs), mortgage (MREITs), stocks, commodities, bonds, we find that shocks to EREIT, MREIT have a transitory impact on other assets. However, among assets occurs at lower frequencies as markets slowly process pricing information. Therefore, EREIT decay gradually spill over three for long periods. also intensity varies with business cycles significant domestic global non‐recession events. attribute dominance (REITs) in destabilising financial system through long‐term transmission heavy linkage REITs highly illiquid underlying direct high leverage, making them more sensitive fundamentals, monetary macroeconomic risks than stocks bonds. The result algorithm‐based broadly supports EREITs shows commodities explanatory power returns. empirical findings implications strategic tactical allocation policy design market stability.