This paper investigates the effects of the Federal Reserve’s quantitative easing (QE) policy on mortgage REITs (MREITs). We utilize the vector autoregression (VAR) model to examine the relationships between MREITs, stocks, interest rate, treasury yield, and the amount of mortgage-backed securities (MBSs) held by the Fed from 2006 to early 2018, which covers the subprime crisis, QE, and QE tapering. Since MREITs hold a majority of MBSs in their portfolios, the QE policy should have a positive impact on MREITs; however, we find evidence that the performance of MREITs is not affected by the policy statistically. Instead, our results show that during QE, MREITs are significantly related to their past performance, the effective federal fund rate, and the stock market. We argue that QE is an appropriate monetary policy which helps the Fed reach its goal without influencing MREIT market.

This paper investigates the effects of the Federal Reserve’s quantitative easing (QE) policy on mortgage REITs (MREITs). We utilize the vector autoregression (VAR) model to examine the relationships between MREITs, stocks, interest rate, treasury yield, and the amount of mortgage-backed securities (MBSs) held by the Fed from 2006 to early 2018, which covers the subprime crisis, QE, and QE tapering. Since MREITs hold a majority of MBSs in their portfolios, the QE policy should have a positive impact on MREITs; however, we find evidence that the performance of MREITs is not affected by the policy statistically. Instead, our results show that during QE, MREITs are significantly related to their past performance, the effective federal fund rate, and the stock market. We argue that QE is an appropriate monetary policy which helps the Fed reach its goal without influencing MREIT market.

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