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Extreme Risk Measures for International REIT Markets

  • Jian ZhouEmail author
  • Randy I. Anderson
Article

Abstract

Extreme risks associated with extraordinary market conditions are catastrophic for all investors. The ongoing financial crisis has perfectly exemplified this point. Surprisingly, there are few studies exploring this issue for REITs. This study aims to close the knowledge gap. We conduct a comprehensive study by utilizing all three methodological categories to examine their forecasting performances of VaR and ES for nine major global REIT markets. Our findings indicate that there is no universally adequate method to model extreme risks across global markets. Also, estimating risks for the stock and REIT markets may require different methods. In addition, we compare the risk profiles between the stock and REIT markets, and find that the extreme risks for REITs are generally higher than those of stock markets. The fluctuations of risk levels are well synchronized between the two types of markets. The current crisis has significantly increased the extreme risk exposure for both REIT and stock investors. In all, our results have significant implications for REIT risk management, portfolio selection, and evaluation.

Keywords

Value-at-Risk Expected shortfall Extreme risks Financial crisis REITs 

Notes

Acknowledgements

We thank the Editor and anonymous referee for their valuable comments and suggestions. We also thank Joshua Harris and Matthew Hurst for their research assistance. All errors remain our own.

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Copyright information

© Springer Science+Business Media, LLC 2010

Authors and Affiliations

  1. 1.Real Estate and Housing, Department of Marketing and Consumer Studies, College of Management and EconomicsUniversity of GuelphGuelphCanada
  2. 2.Department of Finance/Dr. Phillips School of Real Estate, College of BusinessUniversity of Central FloridaOrlandoUSA

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