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Extreme Risk Measures for International REIT Markets

Extreme Risk Measures for International REIT Markets 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. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png The Journal of Real Estate Finance and Economics Springer Journals

Extreme Risk Measures for International REIT Markets

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References (32)

Publisher
Springer Journals
Copyright
Copyright © 2010 by Springer Science+Business Media, LLC
Subject
Economics; Regional/Spatial Science; Financial Services
ISSN
0895-5638
eISSN
1573-045X
DOI
10.1007/s11146-010-9252-5
Publisher site
See Article on Publisher Site

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.

Journal

The Journal of Real Estate Finance and Economics – Springer Journals

Published: Apr 28, 2010

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