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REITs and the Taper Tantrum

Stephen Lee (Cass Business School, City University London, London, UK)

Journal of Property Investment & Finance

ISSN: 1463-578X

Article publication date: 1 August 2016




The purpose of this paper is to empirically examine the effect on US stock, bond and real estate investment trust (REIT) prices triggered by the US Federal Reserve Chairman Ben Bernanke’s announcement of a possible intent to unwind, or taper, quantitative easing (QE). In particular, the author assessed whether the effect of the “Taper Tantrum” was fundamental or financial on financial markets.


The methodology used to determine whether the effect of the “Taper Tantrum” was fundamental or purely financial is that suggested by French and Roll (1986) as extended by Tuluca et al. (2003). The analysis is based on daily data for large cap stocks, small cap stocks, long-term bonds and REITs for 18 months before Ben Bernanke’s announcement and for 18 months after the announcement.


The results show that the “Taper Tantrum” had a fundamental, rather than a financial effect on all asset classes, especially so for REITs.

Practical implications

The author also found that in the post-taper period following Ben Bernanke’s announcement the correlation of REITs with stocks decreased compared with pre-taper period, whereas the correlation of REITS with bonds increased substantially. In other words, the “Taper Tantrum” had a profound effect on the risk/return benefits of including REITs in the US mixed-asset portfolio.


This is the first paper to examine the effect of the “Taper Tantrum” on REITs.



Lee, S. (2016), "REITs and the Taper Tantrum", Journal of Property Investment & Finance, Vol. 34 No. 5, pp. 457-464.



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