Impact of Central Bank Real Estate Purchases on Asset Prices

Abstract

This paper estimates the impact of central bank real estate purchases on asset prices, demonstrating an increase of 0.1% to 0.2% of Real Estate Investment Trust (REIT) prices in the hours following a typical intervention of 0.014% of market capitalization. At longer horizons, the purchases do not appear to have a significant aggregate effect. The primary identification strategy exploits the nature of the Bank of Japan’s (BoJ) policy rule, which triggers purchases when the Tokyo Stock Exchange Real Estate Investment Trust index falls below a certain threshold. Alternative research designs that exploit the counter-cyclical nature of the BoJ’s policy rule and cross-sectional variation in the eligibility of REITs for BoJ purchases are also considered. Overall, these findings are inconsistent with the predictions of canonical and recent models of asset pricing.