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Pricing of Volatility Risk in REITs

Listed author(s):
  • R. Jared DeLisle


    (Washington State University)

  • S. McKay Price


    (Lehigh University)

  • C.F. Sirmans


    (Florida State University)

Registered author(s):

    We examine the pricing of volatility risk in the cross-section of equity real estate investment trust (REIT) stock returns over the 1996 to 2010 period. We consider both aggregate (systematic) volatility and firm-specific (idiosyncratic) volatility. In contrast to the negative and significant price of systematic volatility risk for non-REIT equities, we find that systematic volatility is not priced in REIT returns. Idiosyncratic volatility, estimated using the Fama and French (1993) three-factor model, is negatively priced in the cross-section and is largely independent of non-REIT idiosyncratic volatility. Within the total volatility risk profile, idiosyncratic volatility dominates aggregate volatility in REIT pricing.

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    Article provided by American Real Estate Society in its journal journal of Real Estate Research.

    Volume (Year): 35 (2013)
    Issue (Month): 2 ()
    Pages: 223-248

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    Handle: RePEc:jre:issued:v:35:n:2:2013:p:223-248
    Contact details of provider: Postal:
    American Real Estate Society Clemson University School of Business & Behavioral Science Department of Finance 401 Sirrine Hall Clemson, SC 29634-1323

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    Order Information: Postal: Diane Quarles American Real Estate Society Manager of Member Services Clemson University Box 341323 Clemson, SC 29634-1323
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