Uncovering Volatility Dynamics in Daily REIT Returns

Cotter, John; Stevenson, Simon
April 2007
Journal of Real Estate Portfolio Management;Apr-Jun2007, Vol. 13 Issue 2, p119
Academic Journal
Using a time-varying approach, this paper examines the dynamics of volatility in the real estate investment trust (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 factors that influence REIT volatility, documenting the return and volatility linkages between REIT sub-sectors. It 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 indicates that on a daily basis general market sentiment plays a more fundamental role than more intuitive relationships within the capital markets.


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