Here is the case, as I said, I am working on how Macroeconomic variables affect REIT Index Return. To understand how macroeconomic variables affect REIT which tests or estimation method should I use.
I know I can use OLS but is there any other method to use? All my time series are stationary at I(0).
Since all the macro variables are I(0), you can use VECM also after doing cointegration test (to check for long run relationship). A multivariate regression can also be done, but the cause effect relationship will not be revealed then.
VECM is inappropriate if the variables are all I(0) - stationary series can not be cointegrated!
The macro variables are I(0), this can possibly cointegrate if they do, from from your test of cointegration, use VECM. otherwise use the Dynamic Ordinary Least Squares (DOLS) or the Fully Modified Ordinary Least Squares (FMOLS)
First, I would consider separately equity reits from mortgage reits, as they are likely to respond differently to changes in macroeconomic conditions. Secondly, I would try really hard to take into consideration other variables such as real estate business cycles (that may or may not have relation with macroeconomic variables) in order to give credence to the "ceteris paribus" condition of the comparison. Remember, you are just illustrating your thesis with data, at a maximum, you are showing that your thesis is not falsified by the data, do not expect to be able to do more than that.
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