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The Journal of Real Estate Finance and Economics

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01.11.2009

Long-term Memory in Volatility: Some Evidence from International Securitized Real Estate Markets

verfasst von: Kim Hiang Liow

Erschienen in: The Journal of Real Estate Finance and Economics | Ausgabe 4/2009

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Abstract

While the long memory property is examined in the literature for the US REIT returns, this paper extends the analysis to international securitized real estate markets with the hope of finding answers or confirming prior stock market evidence regarding the presence (or absence) of long memory volatilities for 40 weekly real estate indices (original and hedged). Using a battery of five econometric tests on three alternative risk measures; weekly observed absolute and squared mean deviations and conditional variances, we find statistically significant evidence of long memory in the volatility structure of most securitized real estate markets studied. Volatility persistence is particularly strong in Asia, but is not consistent throughout the period of study.

Vorheriger Artikel UK Housing Market: Time Series Processes with Independent and Identically Distributed Residuals

Nächster Artikel REIT Open-Market Stock Repurchases and Profitability

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Please see Peters (1991), Lo (1991), Cheung and Lai (1995), Lobato and Salvin (1998), Howe et al. (1999), Sadique and Silvapulle (2001) and Henry (2002) for long memory results in the US and international stock market returns. For stock -market studies relating to long memory volatility property, please consult Taylor (1986), Ding et al. (1993), Chung et al. (2000) and So (2000).

Compared to the FTSE EPRA/NAREIT global real estate index series and GPR 250/ GPR General Property Share Indices, the Dow Jones Global Real Estate Securities Index database is the only one that covers all the Asian securitized real estate markets included in this study. Since Dow Jones does not distinguish between the US REITs and REOCs, we obtain the USREIT and USRESI indices from the Dow Jones Wilshire Real Estate Indexes.

Using ZA test, the occurrence of breaks within individual country volatility series has to be examined in the light of various political and economic events that happened in that country. However, such examinations are not intended in this study. For the sake of brevity, we report only the minimum T-statistic associated with each volatility series.

The ZA test results are in agreement with the FIGARCH results reported in Tables 5 and 6. As can be seen, these series have a d (fractional integration parameter) value that is between 0.5 and 1; they are no longer stationary but still mean-reverting, with the effect of the shocks dying away in the long-run.

Baillie (1996) commented that the GPH estimator is potentially robust to non-normality. A technical concern in the application of the GPH estimator is the choice of n, the number of spectral ordinates from the periodogram of time series to include in the estimation of d. This is because, as documented in many stock market studies, improper inclusion of medium- or high-level periodogram ordinates will bias the estimates for d; while too small a regression sample will increase the sample variability of the estimates. Following literature, we report d estimates for n = T^K, where K = 0.50, 0.55 and 0.60 and T represents the sample size, in order to evaluate the sensitivity of the results to the choice of K.

An exploration of the possible causes and theoretical explanations of long memory effect is not intended in this study and would be a better fit for a different paper. We wish to thank one anonymous reviewer for highlighting the two relevant studies in explaining the possible causes of long memory effect particularly for the Asian emerging markets in the sample.

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Titel: Long-term Memory in Volatility: Some Evidence from International Securitized Real Estate Markets
verfasst von: Kim Hiang Liow
Publikationsdatum: 01.11.2009
Verlag: Springer US
Erschienen in: The Journal of Real Estate Finance and Economics / Ausgabe 4/2009
Print ISSN: 0895-5638
Elektronische ISSN: 1573-045X
DOI: https://doi.org/10.1007/s11146-008-9120-8

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