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Uncovering Volatility Dynamics in Daily REIT Returns

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  • Cotter, John
  • Stevenson, Simon

Abstract

Using a time-varying approach, this paper examines the dynamics of volatility in the REIT sector. The results highlight the attractiveness and suitability of using GARCH based approaches in the modeling of daily REIT volatility. The paper examines the influencing factors on REIT volatility, documenting the return and volatility linkages between REIT sub-sectors and also examines the influence of other US equity series. The results contrast with previous studies of monthly REIT volatility. Linkages within the REIT sector and with related sectors such as value stocks are diminished, while the general influence of market sentiment, coming through the large cap indices is enhanced. This would indicate that on a daily basis general market sentiment plays a more fundamental role than more intuitive relationships within the capital markets.

Suggested Citation

  • Cotter, John & Stevenson, Simon, 2004. "Uncovering Volatility Dynamics in Daily REIT Returns," MPRA Paper 3533, University Library of Munich, Germany, revised 2005.
    • Handle: RePEc:pra:mprapa:3533
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    References listed on IDEAS

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    1. John Cotter & Simon Stevenson, 2006. "Multivariate Modeling of Daily REIT Volatility," The Journal of Real Estate Finance and Economics, Springer, vol. 32(3), pages 305-325, May.
    2. Simon Stevenson & Patrick Wilson & Ralf Zurbruegg, 2007. "Assessing the Time-Varying Interest Rate Sensitivity of Real Estate Securities," The European Journal of Finance, Taylor & Francis Journals, vol. 13(8), pages 705-715.
    3. Leh-Chyan So & Jun-Yang Yu, 2015. "IMPROVED DETECTION OF RARE-EVENT RISK OF A PORTFOLIO WITH U.S. REITs," Annals of Financial Economics (AFE), World Scientific Publishing Co. Pte. Ltd., vol. 10(02), pages 1-25, December.
    4. Chiuling Lu & Yiuman Tse & Michael Williams, 2013. "Returns transmission, value at risk, and diversification benefits in international REITs: evidence from the financial crisis," Review of Quantitative Finance and Accounting, Springer, vol. 40(2), pages 293-318, February.
    5. Daniele Bianchi & Massimo Guidolin, 2014. "Can Linear Predictability Models Time Bull and Bear Real Estate Markets? Out-of-Sample Evidence from REIT Portfolios," The Journal of Real Estate Finance and Economics, Springer, vol. 49(1), pages 116-164, July.
    6. Wu, Pei-Shan & Huang, Chien-Ming & Chiu, Chien-Liang, 2011. "Effects of structural changes on the risk characteristics of REIT returns," International Review of Economics & Finance, Elsevier, vol. 20(4), pages 645-653, October.
    7. Masud Alam, 2024. "Volatility in U.S. Housing Sector and the REIT Equity Return," The Journal of Real Estate Finance and Economics, Springer, vol. 69(3), pages 505-544, October.
    8. De Santis, Paola & Drago, Carlo, 2014. "Asimmetria del rischio sistematico dei titoli immobiliari americani: nuove evidenze econometriche [Systematic Risk Asymmetry of the American Real Estate Securities: Some New Econometric Evidence]," MPRA Paper 59381, University Library of Munich, Germany.
    9. Liang Peng & Rainer Schulz, 2013. "Does the Diversification Potential of Securitized Real Estate Vary Over Time and Should Investors Care?," The Journal of Real Estate Finance and Economics, Springer, vol. 47(2), pages 310-340, August.
    10. Lee, Chien-Chiang & Chien, Mei-Se & Lin, Tsoyu Calvin, 2012. "Dynamic modelling of real estate investment trusts and stock markets," Economic Modelling, Elsevier, vol. 29(2), pages 395-407.
    11. Esta Lestari, 2012. "Spillover effects of the sub-prime mortgage crisis to the Asian stock markets," Economic Journal of Emerging Markets, Universitas Islam Indonesia, vol. 4(2), pages 181-194, April.

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