Shock transmission and risk diversification between regional REITs and clean energy markets
DOI: https://doi.org/10.3846/ijspm.2026.28591Abstract
This study examines risk transmission among regional real estate markets and evaluates the diversification potential of clean energy stocks within regional REIT portfolios. A quantile time-frequency vector autoregressive model is used to analyse interconnectedness between regional REITs and clean energy markets over the period from November 2008 to March 2025. The results reveal significant risk spillovers between regional housing stock markets under bullish and bearish conditions. Most interconnectedness occurs over short-term horizons and gradually weakens over time, indicating that contagion effects are largely temporary. Clean energy markets act as a shock absorber and provide hedging benefits for REIT portfolios. Under low-risk, shocks from Asian, European, and UK REITs affect the US and South African markets, while the green bond index serves as a diversifier. In normal markets, European, UK, and US real estate shocks transmit to Asia and South Africa, with renewable energy acting as a buffer against risk. During periods of high uncertainty, other regional markets transmit shocks to the US listed real estate market, yet renewable energy continues to offer diversification benefits. Therefore, clean energy stocks consistently mitigate risk in regional REIT portfolios across market conditions and investment horizons.
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clean energy, regional REITs, risk diversification, shock transmissions, time-frequency QVARHow to Cite
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