On REIT returns and (un-)expected inflation: Empirical evidence based on Bayesian additive regression trees

We use Bayesian Additive Regression Trees (BART) to study the comovement of REIT returns with expected and unexpected inflation. Our findings show that the two inflation components are not among the leading predictors of REIT returns in terms of their relative importance, but also that the marginal effects of the two inflation components for REIT returns changed over time. REIT returns exhibit an asymmetric response to unexpected inflation, a phenomenon mainly concentrated in the Greenspan era.