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Multivariate Modeling of Daily REIT Volatility

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Abstract

This paper examines volatility in REITs using a multivariate GARCH based model. The Multivariate VAR–GARCH technique documents the return and volatility linkages between REIT sub-sectors and also examines the influence of other US equity series. The motivation is for investors to incorporate time-varyng volatility and correlations in their portfolio selection. The results illustrate the differences in results when higher frequency daily data is tested in comparison to the monthly data that has been commonly used in the existing literature. The linkages both within the REIT sector and between REITs and related sectors such as value stocks are weaker than commonly found in monthly studies. The broad market would appear to be more influential in the daily case.

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Authors and Affiliations

  1. Centre for Financial Markets, Department of Banking & Finance, University College Dublin, Blackrock, County Dublin, Ireland

    John Cotter

  2. Real Estate Finance & Investment Group, Faculty of Finance, Cass Business School, City University, 106 Bunhill Row, London, EC1Y 8TZ, UK

    Simon Stevenson

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  1. John Cotter
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  2. Simon Stevenson
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Correspondence to John Cotter.

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Cotter, J., Stevenson, S. Multivariate Modeling of Daily REIT Volatility. J Real Estate Finan Econ 32, 305–325 (2006). https://doi.org/10.1007/s11146-006-6804-9

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