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Co‐skewness and Co‐kurtosis in Global Real Estate Securities

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  • Kim Hiang Liow
  • Lanz C. W. J. Chan

Abstract

We explore the question of whether co‐skewness and co‐kurtosis risk measures can be added to supplement to the covariance risk in pricing global real estate securities and risk premium estimation. Based on a generalized four‐moment CAPM with two alternative world market proxies, we examine Linear, Quadratic and Cubic Market Models using GMM and time‐varying Kalman‐Filter methodologies. Our results show that the second moment is important in explaining real estate securities returns. Furthermore, some real estate securities also display significant time‐varying co‐skewness and/or co‐kurtosis. Co‐kurtosis is more important than co‐skewness in pricing global real estate securities. We further find that the co‐skewness and co‐kurtosis coefficients and the resulting risk premia are sensitive to the market proxy used. The findings of this study provide additional insights into the risk‐return characteristics, pricing and portfolio design in global real estate securities.

Suggested Citation

  • Kim Hiang Liow & Lanz C. W. J. Chan, 2005. "Co‐skewness and Co‐kurtosis in Global Real Estate Securities," Journal of Property Research, Taylor & Francis Journals, vol. 22(2-3), pages 163-203, June.
    • Handle: RePEc:taf:jpropr:v:22:y:2005:i:2-3:p:163-203
    DOI: 10.1080/09599910500453798
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    Cited by:

    1. Quatto, Piero & Vacca, Gianmarco & Zoia, Maria Grazia, 2021. "A new copula for modeling portfolios with skewed, leptokurtic and high-order dependent risk factors," The North American Journal of Economics and Finance, Elsevier, vol. 58(C).
    2. M. Glawischnig & I. Seidl, 2013. "Portfolio optimization with serially correlated, skewed and fat tailed index returns," Central European Journal of Operations Research, Springer;Slovak Society for Operations Research;Hungarian Operational Research Society;Czech Society for Operations Research;Österr. Gesellschaft für Operations Research (ÖGOR);Slovenian Society Informatika - Section for Operational Research;Croatian Operational Research Society, vol. 21(1), pages 153-176, January.
    3. Ali, Heba, 2019. "Does downside risk matter more in asset pricing? Evidence from China," Emerging Markets Review, Elsevier, vol. 39(C), pages 154-174.

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