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The Volatility Case of European REITS and Non-REITs

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Eurasian Business and Economics Perspectives

Part of the book series: Eurasian Studies in Business and Economics ((EBES,volume 18))

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Abstract

Real estate investment trusts have had a difficult time penetrating the European real estate market while non-real estate investment trusts were a widely accepted investment vehicle in all EU member states. This study aims to examine the lack of popularity of real estate investment trust in the European market through the lens of European property research association index performance, comparing real estate investment trust with non-investment trusts head to head in terms of return, co-movement, liquidity and volatility modelling using the GJR-GARCH model. The results showed that, that European real estate investment trusts indexes were not a good diversification strategy. They exhibited high volatility, did not return to the previous stock index level, gave a poorer return to their competitive counterpart, had a higher shock persistency and strong correlation with the stock market index. Although some advantages of real estate investment trusts were identified, such as higher liquidity and stronger resilience to bad news asymmetry, overall, the European real estate market was very fragile. Possible study nuances could be attributed to the fact that investment trusts in the European market were still very young, and their index initial starting point came right at the peak of the real estate price bubble.

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Author information

Authors and Affiliations

  1. Economic, Business and Management Academic Center, Kaunas University of Technology, Kaunas, Lithuania

    Andrius Grybauskas & Vaida Pilinkienė

Authors
  1. Andrius Grybauskas
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  2. Vaida Pilinkienė
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Corresponding author

Correspondence to Andrius Grybauskas .

Editor information

Editors and Affiliations

  1. Faculty of Political Sciences, Istanbul Medeniyet University, Istanbul, Turkey

    Mehmet Huseyin Bilgin

  2. MUFG Union Bank, San Francisco, CA, USA

    Hakan Danis

  3. Faculty of Tourism, Istanbul Medeniyet University, Istanbul, Turkey

    Ender Demir

Appendix: ARIMA and GARCH Model Results for REITs and Non-REITs

Appendix: ARIMA and GARCH Model Results for REITs and Non-REITs

ARIMA models

Index

European REITs

European Non-REITs

European Non-REITs

Obs

3555

3555

–

Model

ARMA(4, 3)

ARMA(3, 2)

–

Method

MLE

MLE

–

AIC

12269.964

11408.298

–

Parameter

Coefficients

Coefficients

Coefficients

AR(1)

1.4789***

(0.239)

−0.6484***

(0.017)

–

AR(2)

−1.3529***

(0.335)

−0.9445***

(0.012)

–

AR(3)

0.5969*

(0.211)

0.0757***

(0.016)

–

AR(4)

−0.0608*

(0.021)

 

–

MA(1)

−1.4213***

(0.238)

0.7234***

(0.002)

–

MA(2)

1.2654***

(0.319)

0.9965***

(0.003)

–

MA(3)

−0.5357*

(0.191)

 

–

GJR–GARCH models

Distribution

Standardized student’s t

Standardized student’s t

Standardized student’s t

Method

MLE

MLE

MLE

Model

GJR-GARCH (1,1,1)

GJR-GARCH (1,1,1)

GJR-GARCH (1,1,2)

AIC

10696.6

9769.04

9768.25

Parameter

Coefficients

Coefficients

Coefficients

Omega

0.0236***

(0.00603)

0.0257***

(0.0063)

0.0316***

(00071)

Alpha

0.0452***

(0.01)

0.0257***

(0.0092)

0.0314***

(0.01)

Gamma

0.1133***

(0.002)

0.1438***

(0.023)

0.1858***

(0.029)

Beta(1)

0.8864***

(0.016)

0.8847***

(0.018)

0.5152***

(0.124)

Beta(2)

−

−

0.3387***

(0.119)

  1. Notes: *** Denotes significance levels at 0.01, * at 0.1. Numbers in parenthesis are standard errors

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Grybauskas, A., Pilinkienė, V. (2021). The Volatility Case of European REITS and Non-REITs. In: Bilgin, M.H., Danis, H., Demir, E. (eds) Eurasian Business and Economics Perspectives. Eurasian Studies in Business and Economics, vol 18. Springer, Cham. https://doi.org/10.1007/978-3-030-71869-5_3

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