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Volatility Targeting for U.S. Equity REITs: A Strategy for Minimizing Extreme Downside Risk?

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  • Cay Oertel

Abstract

The study examines the feasibility of Volatility Targeting (VT) to minimize extreme downside risk for U.S. Equity REITs. The empirical study applies a two-stage approach. First, a backtest of buy-and-hold, and VT based on various volatility estimators for each equity REIT security between 1999 and 2019, is performed. Subsequently, a mean-CVaR-optimization for different equity REIT subclasses is carried out. The present study finds CVaR reductions of VT in comparison to buy-and-hold across all subclasses, as well as the entire sample. Interestingly, these improvements differ across the REIT subclasses and volatility estimators.

Suggested Citation

  • Cay Oertel, 2021. "Volatility Targeting for U.S. Equity REITs: A Strategy for Minimizing Extreme Downside Risk?," Journal of Real Estate Portfolio Management, Taylor & Francis Journals, vol. 27(1), pages 63-77, January.
    • Handle: RePEc:taf:repmxx:v:27:y:2021:i:1:p:63-77
    DOI: 10.1080/10835547.2021.1971930
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