Post by Sapphire Capital on Jul 29, 2012 1:06:46 GMT 4
Extreme Risk Measures for International REIT Markets
Jian Zhou
University of Guelph
Randy I. Anderson
City University of New York, CUNY Baruch College - Zicklin School of Business - Department of Economics and Finance
2012
Journal of Real Estate Finance and Economics, Vol. 45, No. 1, 2012
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.
papers.ssrn.com/sol3/papers.cfm?abstract_id=2095245