Examining the stochastic behavior of REIT returns: Evidence from the regime switching approach

► We examine the stochastic behavior of the returns on real estate investment trusts. ► The permanent and transitory components in REIT monthly returns are decomposed. ► We use the unobserved component Markov switching (UC-MSD) model to achieve this. ► The durations of the high-variance regimes for both components are short-lived.