Volatilities and Momentum Returns in Real Estate Investment Trusts

Hung, Szu-Yin Kathy; Glascock, John L.

doi:10.1007/s11146-008-9165-8

Cited by 48 publications

(25 citation statements)

References 51 publications

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“…We examine whether our data present similar relations between IV and the momentum profits as documented in the literature. Consistent with prior work (i.e., Arena, Haggard, and Yan 2008; Li et al ; Hung and Glascock ), our data show a skewed U‐shaped relation across momentum portfolios, with losers having significantly higher IV than winners (see Figure ).…”

Section: The Estimation Of Idiosyncratic Risk and Sample Representatisupporting

confidence: 91%

“…Consistent with this mispricing/limits‐to‐arbitrage hypothesis, many empirical studies (e.g., Hung and Glascock ; Arena, ; Li et al ; McLean ) show that indeed the securities that comprise the winner or loser portfolios typically have higher IV than those in the other deciles. Additionally, the securities in the loser portfolio appear to have significantly higher IV on average than those in the winner portfolio.…”

Section: Introductionmentioning

confidence: 84%

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Idiosyncratic Risk Premia and Momentum

Chichernea

Slezak

2013

J of Financial Research

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Theory predicts that in the presence of incomplete information, underdiversified investors will demand idiosyncratic risk premia (IRP) as compensation for idiosyncratic volatility (IV). We estimate IV and IRP at the individual stock level and document the extent to which momentum profits can be explained by cross-sectional variation in IRP. We show that a large portion of momentum profits can be explained by cross-sectional variation in IRP and that, as predicted by theory, variations in both momentum profits and IRP are related to the ratio of firm size to investor base. However, significant momentum profits in low-IV securities cannot be explained by cross-sectional variation in IRP.

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Section: The Estimation Of Idiosyncratic Risk and Sample Representatisupporting

confidence: 91%

Section: Introductionmentioning

confidence: 84%

Idiosyncratic Risk Premia and Momentum

Chichernea

Slezak

2013

J of Financial Research

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“…A positive relationship between idiosyncratic risk and REIT returns seems to exist in the pos-1993 era. While the results seem to contradict those of Chiang et al (2009) and Hung and Glascock (2010), they are in line with Ooi et al (2009). Lastly, DeLisle et al (2011 show that from 1996 to 2009, idiosyncratic risk dominates systematic risk and is negatively priced in the cross-section of REIT returns.…”

Section: Literature Reviewcontrasting

confidence: 66%

“…Moreover, the authors show that the size and BE/ME effect cease to be significant once idiosyncratic volatility is included, while the momentum effect maintains its significance. Hung and Glascock (2010) analyse the time-varying relationship between idiosyncratic risk and momentum returns for 193 REITs that were traded from 1983 to 2006. The results suggest that momentum returns show asymmetric volatility, as momentum returns are higher when volatility is higher.…”

Section: Literature Reviewmentioning

confidence: 99%

Idiosyncratic risk and the cross-section of European real estate equity returns

Schulte

2014

Journal of European Real Estate Research

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If you would like to write for this, or any other Emerald publication, then please use our Emerald for Authors service information about how to choose which publication to write for and submission guidelines are available for all. Please visit www.emeraldinsight.com/authors for more information. About Emerald www.emeraldinsight.comEmerald is a global publisher linking research and practice to the benefit of society. The company manages a portfolio of more than 290 journals and over 2,350 books and book series volumes, as well as providing an extensive range of online products and additional customer resources and services.Emerald is both COUNTER 4 and TRANSFER compliant. The organization is a partner of the Committee on Publication Ethics (COPE) and also works with Portico and the LOCKSS initiative for digital archive preservation. AbstractPurpose -This study is the first to examine the role of idiosyncratic risk in the pricing of European real estate equities. The capital asset pricing model predicts that in equilibrium, investors should hold the market portfolio. As a result, investors should only be rewarded for carrying undiversifiable systematic risk and not for diversifiable idiosyncratic risk. The study is adding to the growing body of countering studies by first examining time trends of idiosyncratic risk and subsequently the pricing of idiosyncratic risk in European real estate equities. The paper aims to discuss these issues. Design/methodology/approach -The study analyses 293 real estate equities from 16 European capital markets over the 1991-2011 period. The framework of Fama and MacBeth is employed. Regressions of the cross-section of expected equity excess returns on idiosyncratic risk and other firm characteristics such as beta, size, book-to-market equity (BE/ME), momentum, liquidity and co-skewness are performed. Due to recent evidence on the conditional pricing of European real estate equities, the pricing is also investigated using the conditional framework of Pettengill et al. Either realised or expected idiosyncratic volatility forecasted using a set of exponential generalized autoregressive conditional heteroskedasticity models are employed. Findings -The initial analysis of time trends in idiosyncratic risk reveals that while the early 1990s are characterised by both high total and idiosyncratic volatility, a strong downward trend emerged in 1992 which was only interrupted by the burst of the dotcom bubble and the 9/11 attacks along with the global financial and economic crisis. The largest part of total volatility is idiosyncratic and therefore firm-specific in nature. Simple cross-correlations indicate that high beta, small size, high BE/ME, low momentum, low liquidity and high co-skewness equities have higher idiosyncratic risk. While size and BE/ME are priced unconditionally from 1991 to 2011, both measures of idiosyncratic risk fail to achieve significance at reasonable levels. However, once conditioned on the general equity market or real estate equity market, a strong positive relati...

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“…REITs are included for two reasons: first, REITs, along with stocks, are rich in the feature of covariance asymmetry (e.g. Hung and Glascock, 2010;Liow, 2012;Yang et al, 2012;Zhou and Kang, 2011;etc. ); second, they are a distinctive investment alternative to stocks by allowing easy access to real estate investments without directly owning or managing the underlying assets.…”

Section: Introductionmentioning

confidence: 99%