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A specialised volatility index for the new GICS sector - Real estate

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  • Mi, Lin
  • Benson, Karen
  • Faff, Robert

Abstract

In this paper we show why a Real Estate VIX is needed. We develop a 30-day forward-looking real estate volatility index (REVIX), based on a state preference approach using US equity Real Estate Investment Trusts (REITs), for the new Real Estate Sector under the Global Industry Classification Standard (GICS). We show that REVIX is a very useful predictor of future REIT realized volatility. We further explore an economic application of REVIX and demonstrate that REVIX, similar to VIX, serves as an investor fear gauge for the real estate market.

Suggested Citation

  • Mi, Lin & Benson, Karen & Faff, Robert, 2018. "A specialised volatility index for the new GICS sector - Real estate," Economic Modelling, Elsevier, vol. 70(C), pages 438-446.
    • Handle: RePEc:eee:ecmode:v:70:y:2018:i:c:p:438-446
    DOI: 10.1016/j.econmod.2017.08.025
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    Cited by:

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    3. Sergiy Saydometov & Sanjiv Sabherwal & Ramya Rajajagadeesan Aroul, 2020. "Sentiment and its asymmetric effect on housing returns," Review of Financial Economics, John Wiley & Sons, vol. 38(4), pages 580-600, October.

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    More about this item

    Keywords

    REITs; Volatility index; State preference approach; Economic significance; Fear gauge;
    All these keywords.

    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • R33 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Nonagricultural and Nonresidential Real Estate Markets

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