Combining realized measures to forecast REIT volatility

2020 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Jian Zhou
Keyword(s):  
Real Estate ◽  
High Frequency ◽  
Real Estate Investment Trust ◽  
Real Estate Investment ◽  
Content Type ◽  
Combination Strategies ◽  
Out Of Sample ◽  
The Individual ◽  
Reit Volatility ◽  
Do So

Purpose This study aims to show that the best-performing realized measures vary across markets when it comes to forecast real estate investment trust (REIT) volatility. This finding provides little guidance for practitioners on which one to use when facing a new market. The authors attempt to fill the hole by seeking a common estimator, which can study for different markets. Design/methodology/approach The authors do so by drawing upon the general forecasting literature, which finds that combinations of individual forecasts often outperform even the best individual forecast. The authors carry out the study by first introducing a number of commonly used realized measures and then considering several different combination strategies. The authors apply all of the individual measures and their different combinations to three major global REIT markets (Australia, UK and US). Findings The findings show that both unconstrained and constrained versions of the regression-based combinations consistently rank among the group of best forecasters across the three markets under study. None of their peers can do it including the three simple combinations and all of the individual measures. The conclusions are robust to the choice of evaluation metrics and of the out-of-sample evaluation periods. Originality/value The study provides practitioners with easy-to-follow insights on how to forecast REIT volatility, that is, use a regression-based combination of individual realized measures. The study has also extended the thin real estate literature on using high-frequency data to examine REIT volatility.

scholarly journals A Preliminary Analysis of Islamic Real Estate Investment Trust (I-REIT) Volatility as a Potential Waqf Development

2018 ◽  
Vol 10 (3-4) ◽  
Author(s):  
Azhan Rashid Senawi
Keyword(s):  
Standard Deviation ◽  
Real Estate ◽  
Capital Market ◽  
Preliminary Analysis ◽  
Alternative Solution ◽  
Real Estate Investment Trust ◽  
Real Estate Investment ◽  
Investment Trust ◽  
Reit Volatility ◽  
Human Kind

The development of waqf institutions is a significant attribution to ensure a sustainable and progressive prosperity to the Muslim socio-economic. The aspiration of the waqf development is to preserve the benefits of the beneficiaries and to all the human kind. However, the issues of the fund shortage are one of the tough issues that need to be solved. I-REIT (Islamic Real Estate Investment Trust) is one of a suggestion of diversification as an alternative solution to the aspect of fund constraint. Therefore, this paper attempts to examine the level of I-REIT volatility in comparison to typical REIT as a preliminary experiment. By using a conventional standard deviation or variance analysis of selected I-REIT and REIT counter, a preliminary result shows that I-REIT has a lower volatility impact than the REIT. This less-impact I-REIT to the market exploitation justifies that the Islamic capital market instruments of Islamic real estate investment trust (I-REIT) is an alternative potential waqf mechanism in developing and advancing waqf property in Malaysia. Thus, this study proposes the initiation of the alternative waqf of I-REIT in enhancing the dynamism of waqf practice in Malaysia. 

Cross-listing of real estate investment trusts (REITs)

2017 ◽  
Vol 35 (5) ◽  
pp. 509-527
Author(s):  
Kim Hin David Ho ◽  
Kwame Addae-Dapaah ◽  
Fang Rui Lina Peck
Keyword(s):  
Real Estate ◽  
Foreign Market ◽  
Real Estate Investment Trusts ◽  
Domestic Market ◽  
Risk Exposure ◽  
Real Estate Investment ◽  
Content Type ◽  
Cross Listing ◽  
Market Beta ◽  
The Cross

Purpose The purpose of this paper is to examine the common stock price reaction and the changes to the risk exposure of the cross-listing for real estate investment trusts (REITs). Design/methodology/approach The paper adopts the event study methodology to assess the abnormal returns (ARs). Pre- and post-cross-listing changes in the risk exposure for the domestic and foreign markets are examined, via a modified two-factor international asset pricing model. A comparison is made for two broad cross-listings, namely, the depositary receipts and the dual ordinary listings, to examine the impacts from institutional differences. Findings Cross-listed REITs generally experience positive and significant ARs throughout the event window, implying significant superior returns associated with the cross-listing for REITs. On systematic risks, REITs exhibit significant decline in their domestic market β coefficients after the cross-listing. However, the foreign market β coefficients do not yield conclusive evidence when compared across the sample. Research limitations/implications Results are consistent with prudential asset allocation for potential diversification gains from the cross-listing, as the reduction from the domestic market beta is more significant than changes in the foreign market beta. Practical implications The results and findings should incentivise REIT managers to explore viable cross-listing. Social implications Such cross-listing for REITs should enhance risk diversification. Originality/value This is a pioneer study on cross-listing of REITs. It provides a basis for investment decision making, and could provoke further research and discussion.

scholarly journals The Culture of Amateur Real Estate Investing

2019 ◽  
Author(s):  
Philip Garboden
Keyword(s):  
Real Estate ◽  
Participant Observation ◽  
Prior Experience ◽  
Investment Decisions ◽  
Third Party ◽  
Real Estate Investment ◽  
Real Estate Markets ◽  
Self Sufficiency ◽  
Depth Interviews ◽  
Do So

The majority of rental properties in the U.S. today is owned by small- to medium-sized investors, many of whom enter the trade with little prior experience. This paper considers the cultural factors that motivate these amateurs to purchase real estate–an investment with high risks and relatively poor returns. Drawing on in-depth interviews with 93 investors in three heterogeneous real estate markets, Baltimore, MD, Dallas, TX, and Cleveland, OH, combined with participant observation of 22 real estate investment association meetings (REIAs), this paper finds that amateurs who decide to become investors often do so during periods when their professional identities are insecure or they perceive their retirement portfolios to be insufficient. Through participation in real estate investment associations and other investor networks, they quickly internalize “investor culture,” embracing ideologies of self-sufficiency and risk. “Investor culture”—perpetuated by REIAs--motivates and legitimizes strategies of action that lead to increasingly leveraged investments. Third-party actors, including real estate gurus, paid mentors, and private “hard money” lenders exploit the intersection of insecurity and the propagation of investor culture to profit off amateurs’ investment decisions.

The Introduction of Real Estate Investment Trusts [REITs] in Germany

2007 ◽  
Vol 8 (1) ◽  
pp. 133-142 ◽  
Author(s):  
Constantin M. Lachner ◽  
Rafael von Heppe
Keyword(s):  
Real Estate ◽  
Capital Market ◽  
Real Estate Investment Trust ◽  
Real Estate Investment ◽  
German Government ◽  
Corporate Capital ◽  
Retroactive Effect ◽  
Preparation Phase ◽  
In The Beginning ◽  
Lobbying Group

The German Real Estate Investment Trust – or, G-REIT – is in the centre of interest in Germany these days and expected to be introduced in Germany in the beginning of 2007. After a preparation phase initiated in 2003 by a lobbying group (“IFD”) under the former German government, the new government has most recently drafted a bill with respect to the introduction of G-REITs (“bill”). This bill remains to be subject to parliamentary discussion and is likely to be partially modified before its final adoption: in addition to its passage in the Bundestag (Federal Parliament), it requires the approval of the Bundesrat (German Federal Council). Following its first reading it will be committed to the Financial Committee, which will conduct hearings. However, the legislator intends to pass the bill in the first quarter of 2007 to take retroactive effect as of 1 January 2007. This essay intends to outline fundamental corporate, capital market, and tax related G-REIT parameters provided for by the G-REIT Act in its present form.

Spatial effects and non-linearity in hedonic modeling

2018 ◽  
Vol 36 (1) ◽  
pp. 32-49 ◽  
Author(s):  
Marcelo Cajias ◽  
Sebastian Ertl
Keyword(s):  
Real Estate ◽  
Functional Form ◽  
Asymptotic Properties ◽  
Additive Model ◽  
Percentage Error ◽  
Spatial Effects ◽  
Hedonic Models ◽  
Data Set ◽  
Content Type ◽  
Out Of Sample

Purpose The purpose of this paper is to test the asymptotic properties and prediction accuracy of two innovative methods proposed along the hedonic debate: the geographically weighted regression (GWR) and the generalized additive model (GAM). Design/methodology/approach The authors assess the asymptotic properties of linear, spatial and non-linear hedonic models based on a very large data set in Germany. The employed functional form is based on the OLS, GWR and the GAM, while the estimation methodology was chosen to be iterative in forecasting, the fitted rents for each quarter based on their 1-quarter-prior functional form. The performance accuracy is measured by traditional indicators such as the error variance and the mean squared (percentage) error. Findings The results provide evidence for a clear disadvantage of the GWR model in out-of-sample forecasts. There exists a strong out-of-sample discrepancy between the GWR and the GAM models, whereas the simplicity of the OLS approach is not substantially outperformed by the GAM approach. Practical implications For policymakers, a more accurate knowledge on market dynamics via hedonic models leads to a more precise market control and to a better understanding of the local factors affecting current and future rents. For institutional researchers, instead, the findings are essential and might be used as a guide when valuing residential portfolios and forecasting cashflows. Even though this study analyses residential real estate, the results should be of interest to all forms of real estate investments. Originality/value Sample size is essential when deriving the asymptotic properties of hedonic models. Whit this study covering more than 570,000 observations, this study constitutes – to the authors’ knowledge – one of the largest data sets used for spatial real estate analysis.

Underpricing and market timing in SEOs of European REITs and REOCs

2019 ◽  
Vol 38 (3) ◽  
pp. 163-180
Author(s):  
Felix Lorenz
Keyword(s):  
Real Estate ◽  
Lower Cost ◽  
Market Timing ◽  
Seasoned Equity Offerings ◽  
Equity Offerings ◽  
Real Estate Investment ◽  
Content Type ◽  
Price Discounts ◽  
Property Companies ◽  
Practical Implications

Purpose The purpose of this paper is to contribute to the literature on seasoned equity offerings (SEOs) by examining the underpricing of European real estate corporations and identifying determinants explaining the phenomenon of setting the offer price at a discount at SEOs. Design/methodology/approach With a sample of 470 SEOs of European real estate investment trusts (REITs) and real estate operating companies (REOCs) from 2004 to 2018, multivariate regression models are applied to test for theories on the pricing of SEOs. This paper furthermore tests for differences in underpricing for REITs and REOCs as well as specialized and diversified property companies. Findings Significant underpricing of 3.06 percent is found, with REITs (1.90 percent) being statistically less underpriced than REOCs (5.08 percent). The findings support the market timing theory by showing that managers trying to time the equity market gain from lower underpricing. Furthermore, underwritten offerings are more underpriced to reduce the risk of the arranging bank, but top-tier underwriters are able to reduce offer price discounts by being more successful in attracting investors. The results cannot support the value uncertainty hypothesis, but they are in line with placement cost stories. In addition, specialized property companies are subject to lower underpricing. Practical implications An optimal issuance strategy taking into account timing, relative offer size and the choice of the underwriter can minimize the amount of “money left on the table” and therefore contribute to the lower cost of raising capital. Originality/value This is the first study to investigate SEO underpricing for European real estate corporations, pricing differences of REITs and REOCs in seasoned offerings and the effect of market timing on the pricing of SEOs.

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