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Volatility jumps and their determinants in REIT returns

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  • Odusami, Babatunde O.

Abstract

This paper examines the roles of jumps in the time series of Real Estate Investment Trust (REIT) returns. Using measures of the quadratic variation of high-frequency REIT returns, it documents evidence of jumps in the returns and volatility of returns. Evidence of persistence in the occurrence of jumps is also uncovered. Motivated by these findings, the paper also examines whether a set of financial and macroeconomic state variables can account for the magnitude of jumps seen in the returns and volatilities of REIT indices. By applying linear and threshold regressions, heterogeneous autoregressive volatility, and conditional hazard models on the jump data, it is shown that variations in the magnitude of jumps, the frequency of jumps, and the realized volatilities of REIT returns can be explained by term spread, default spread, VIX, equity market returns, commodity returns, and the U.S. dollar exchange rates.

Suggested Citation

  • Odusami, Babatunde O., 2021. "Volatility jumps and their determinants in REIT returns," Journal of Economics and Business, Elsevier, vol. 113(C).
    • Handle: RePEc:eee:jebusi:v:113:y:2021:i:c:s014861951930414x
    DOI: 10.1016/j.jeconbus.2020.105943
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    References listed on IDEAS

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    Cited by:

    1. Odusami, Babatunde O, 2021. "Forecasting the Value-at-Risk of REITs using realized volatility jump models," The North American Journal of Economics and Finance, Elsevier, vol. 58(C).
    2. Salisu, Afees A. & Gupta, Rangan & Bouri, Elie, 2023. "Testing the forecasting power of global economic conditions for the volatility of international REITs using a GARCH-MIDAS approach," The Quarterly Review of Economics and Finance, Elsevier, vol. 88(C), pages 303-314.
    3. Walid Mensi & Zhuhua Jiang & Xuan Vinh Vo & Seong‐Min Yoon, 2023. "Asymmetric volatility transmission and hedging strategies among REIT, stock, and oil markets," Australian Economic Papers, Wiley Blackwell, vol. 62(4), pages 597-615, December.
    4. Hassan Zada & Huma Maqsood & Shakeel Ahmed & Muhammad Zeb Khan, 2023. "Information shocks, market returns and volatility: a comparative analysis of developed equity markets in Asia," SN Business & Economics, Springer, vol. 3(1), pages 1-22, January.
    5. Matteo Bonato & Oguzhan Cepni & Rangan Gupta & Christian Pierdzioch, 2022. "Forecasting realized volatility of international REITs: The role of realized skewness and realized kurtosis," Journal of Forecasting, John Wiley & Sons, Ltd., vol. 41(2), pages 303-315, March.
    6. Hassan Zada & Arshad Hassan & Wing-Keung Wong, 2021. "Do Jumps Matter in Both Equity Market Returns and Integrated Volatility: A Comparison of Asian Developed and Emerging Markets," Economies, MDPI, vol. 9(2), pages 1-26, June.

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    More about this item

    Keywords

    REITs; Real Estate; Jumps; Bipower Variation; Autoregressive Conditional Hazard;
    All these keywords.

    JEL classification:

    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)

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