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Low Volatility Investing in U.S. Equity REITs

Author

Listed:
  • Greg MacKinnon

    (Pension Real Estate Association)

  • Jon Spinney

    (New Brunswick Investment Management)

Abstract

We examine the market for U.S. equity real estate investment trusts (REITs) for evidence of the volatility effect, in which low volatility stocks tend to outperform high volatility ones, as has been found in the general equity market by prior research. While there is some evidence of a volatility effect in the first ten years of the sample, this disappears in a more recent time period. Furthermore, we test the efficacy of low risk portfolio construction techniques and find that none perform any better than a market cap weighted portfolio ¡V although they are also no worse ¡V over any of the time periods examined. Thus, there is no evidence that using a risk-based portfolio design that emphasizes low volatility would improve portfolio performance for a REIT allocation.

Suggested Citation

  • Greg MacKinnon & Jon Spinney, 2017. "Low Volatility Investing in U.S. Equity REITs," International Real Estate Review, Global Social Science Institute, vol. 20(1), pages 1-21.
    • Handle: RePEc:ire:issued:v:20:n:01:2017:p:1-21
    as

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    References listed on IDEAS

    as
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    4. Blitz, David & Pang, Juan & van Vliet, Pim, 2013. "The volatility effect in emerging markets," Emerging Markets Review, Elsevier, vol. 16(C), pages 31-45.
    5. Fama, Eugene F & MacBeth, James D, 1973. "Risk, Return, and Equilibrium: Empirical Tests," Journal of Political Economy, University of Chicago Press, vol. 81(3), pages 607-636, May-June.
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    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    REITs; low volatility anomaly; portfolio construction;
    All these keywords.

    JEL classification:

    • L85 - Industrial Organization - - Industry Studies: Services - - - Real Estate Services

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