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Modeling of daily REIT returns and volatility

Author

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  • Dimitrios Asteriou
  • Kyriaki Begiazi

Abstract

Purpose - The purpose of this paper is to examine the US real estate investment trusts (REITs) for the 2000‐2012 period using GARCH models that include the day‐of‐the‐week effect and the stock‐market index as explanatory variables. This technique documents the return and volatility of equity, mortgage and hybrid REITs. Design/methodology/approach - The study starts with a CAPM model and continues with GARCH(1,1), TGARCH(1,1) and EGARCH(1,1) models for each of the REIT subcategories with and without the days of the week as dummy variables. Findings - The results show that the best‐fitted model is EGARCH except the equity REIT series without the dummy variables that is better described with the GARCH. The stock market has a significant impact on REIT returns but no remarkable significance in respect of the day‐of‐the‐week effect. Practical implications - The findings suggest that there is not a significant risk diversification potential between REITs and common stocks. In the scope of the credit crisis which originated in the real estate market it must be taken seriously into consideration that REITs, except of the equity REITs, are more sensitive to bad news. Originality/value - This paper uses daily returns for each of the three main REIT subcategories opposed to the monthly that are commonly used. We point out the evidence of asymmetric responses, suggesting the leverage effect and differential financial risk depending on the direction of price change movements.

Suggested Citation

  • Dimitrios Asteriou & Kyriaki Begiazi, 2013. "Modeling of daily REIT returns and volatility," Journal of Property Investment & Finance, Emerald Group Publishing Limited, vol. 31(6), pages 589-601, September.
  • Handle: RePEc:eme:jpifpp:v:31:y:2013:i:6:p:589-601
    DOI: 10.1108/JPIF-06-2013-0035
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    Citations

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    Cited by:

    1. Kyriaki Begiazi & Dimitrios Asteriou & Keith Pilbeam, 2016. "A multivariate analysis of United States and global real estate investment trusts," International Economics and Economic Policy, Springer, vol. 13(3), pages 467-482, July.
    2. Masud Alam, 2021. "Time Varying Risk in U.S. Housing Sector and Real Estate Investment Trusts Equity Return," Papers 2107.10455, arXiv.org.
    3. Cohen Viktorija & Burinskas Arūnas, 2020. "The Evaluation of the Impact of Macroeconomic Indicators on the Performance of Listed Real Estate Companies and Reits," Ekonomika (Economics), Sciendo, vol. 99(1), pages 79-92, June.
    4. Tosin B. Fateye & Oluwaseun D. Ajay & Cyril A. Ajay, 2021. "Modelling of Daily Price Volatility of South Africa Property Stock Market Using GARCH Analysis," AfRES 2021-013, African Real Estate Society (AfRES).

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