On the Risk of Novel Specialized REITs

Piao, Xiaorui; Yao, Wenjing; Mei, Bin

doi:10.1080/10835547.2021.2008095

Cited by 4 publications

(3 citation statements)

References 42 publications

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“…(2016) found that the volatility of property sector REITs in the USA was higher than the diversified REITs. In another study, Piao et al . (2022) investigated the volatility characteristics of contemporaneous property sector REITs (hotel, healthcare and self-storage REITs) in the USA.…”

Section: Introductionmentioning

confidence: 91%

“…In what follows, there is master lease agreement between the two parties, whereby hotel REITs have access to minimum fixed income and variable income from hotel revenues, such as hotel room rates and food & beverages (F&B) activities. Hotel REITs are flexible to adjust their room rates on daily basis (Demiralay and Kilincarslan, 2022; Piao et al ., 2022).…”

Section: Background Of Japanese Reitsmentioning

confidence: 99%

“…Piao et al (2016) found that the volatility of property sector REITs in the USA was higher than the diversified REITs. In another study, Piao et al (2022) investigated the volatility characteristics of contemporaneous property sector REITs (hotel, healthcare and self-storage REITs) in the USA. As a result, each sector displayed each time-varying and distinct volatility structure, whereby hotel REITs emerged as the most volatile asset.…”

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confidence: 99%

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The dynamic role of the Japanese property sector REITs in mixed-assets portfolio

Razak

2023

JPIF

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PurposeThis study examined the dynamic role of the Japanese property sector, particularly the real estate investment trusts (REITs), in mixed-asset portfolios of stocks and bonds, as well as office, retail, hotel and residential REITs.Design/methodology/approachDaily data were retrieved from 01 January 2008 to 31 December 2019. The sample time frame consisted of in-sample and out-of-sample periods. The dynamic conditional correlation-generalised autoregressive conditional heteroskedastic (DCC-GJRGARCH) model was deployed to obtain the forecast estimates of time-varying volatility of REITs and correlations with other assets. The estimates were employed to construct out-of-sample portfolios based on the three assets for daily investment. The five sets of portfolios with each individual property sector REITs, as well as a portfolio of stocks and bonds that served as a benchmark, were produced. The average utility for each set of portfolios was estimated and compared with the average utility of the benchmark portfolio. The average transaction cost (TC) for portfolio rebalancing was calculated as well.FindingsThe forecast of volatility estimates for each property sector revealed that each asset displayed a similar pattern with the differences in the volatility magnitude. Notably, hotel and retail REITs were more volatile than other property sector REITs. The property sector REITs exhibited a positive correlation with stocks but negatively linked with bonds. The results unveiled the diversification benefits of incorporating property sector REITs. The portfolio with property sector REITs had higher risk-adjusted returns and utility, compared to portfolio consisting of stocks and bonds. The benefits outweighed the TC for portfolio rebalancing.Practical implicationsThis study highlights the importance of quantifying the conditional time-varying volatility and correlations of the property sector REITs with other asset returns, especially for investment decision, to select and include property sector REITs in mixed-asset portfolios. For fund managers seeking liquid assets in daily investment, this analysis suggests the inclusion of hotel and retail REITs to enhance REITs' portfolio performance.Originality/valueThis study is the first to investigate the dynamic characteristics of the volatility and correlation of each property sector REITs with other financial assets by employing the conditional framework that accounted for short- and long-run persistency in economic shocks. The reported outcomes shed light on the differences in the underlying properties that contribute to the variances in dynamic volatility of each sector REITs, as well as REITs' correlations with stocks and bonds. This application enables the authors to transmit the dynamics of variance-covariance matrix amongst each property sector REITs, stocks and bonds into asset allocation problem on a daily basis.

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Section: Introductionmentioning

confidence: 91%

Section: Background Of Japanese Reitsmentioning

confidence: 99%

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confidence: 99%

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The dynamic role of the Japanese property sector REITs in mixed-assets portfolio

Razak

2023

JPIF

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Common risk factors and risk–return trade-off for REITs and treasuries

Bouheni

Tewari

2023

J Asset Manag

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Features of different asset types and extreme risk transmission during the COVID-19 crisis

Tsai

2024

Financ Innov

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Unlike the current extensive literature, which discusses which assets can avoid the risks caused by the COVID-19 pandemic, this study examines whether the characteristics of different assets affect the extreme risk transmission of the COVID-19 crisis. This study explores the effects of COVID-19 pandemic–related risk factors (i.e., pandemic severity, pandemic regulations and policies, and vaccination-related variables) on the risk of extreme volatility in asset returns across eight assets. These eight assets belong to the following classes: virtual, financial, energy, commodities, and real assets. To consider the different possible aspects of the COVID-19 impact, this study adopts both empirical methods separately, considering variables related to the pandemic as exogenous shocks and endogenous factors. Using these methods, this study enabled a systematic analysis of the relationship between the features of different asset types and the effects of extreme risk transmission during the COVID-19 crisis. The results show that different types of asset markets are affected by different risk factors. Virtual and commodity assets do not exhibit extreme volatility induced by the COVID-19 pandemic. The energy market, including crude oil, is most affected by the negative impact of the severity of the pandemic, which is unfavorable for investment at the beginning of the pandemic. However, after vaccinations and pandemic regulations controlled the spread of infection, the recovery of the energy market made it more conducive to investment. In addition, this study explains the differences between the hedging characteristics of Bitcoin and gold. The findings of this study can help investors choose asset types systematically when faced with different shocks.

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On the Risk of Novel Specialized REITs

Cited by 4 publications

References 42 publications

The dynamic role of the Japanese property sector REITs in mixed-assets portfolio

The dynamic role of the Japanese property sector REITs in mixed-assets portfolio

Common risk factors and risk–return trade-off for REITs and treasuries

Features of different asset types and extreme risk transmission during the COVID-19 crisis

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