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Dynamic correlations between REIT sub-sectors and the implications for diversification

Listed author(s):
  • James Chong
  • Alexandra Krystalogianni
  • Simon Stevenson
Registered author(s):

    The issue of whether Real Estate Investment Trusts (REITs) should pursue a focused or diversified investment strategy remains an ongoing debate within both the academic and industry communities. This article considers the relationship between REITs focused on different property sectors in a Generalized Autoregressive Conditional Heteroscedasticity-Dynamic Control Correlation (GARCH-DCC) framework. The daily conditional correlations reveal that since 1990 there has been a marked upward trend in the coefficients between US REIT sub-sectors. The findings imply that REITs are behaving in a far more homogeneous manner than in the past. Furthermore, the argument that REITs should be focused in order that investors can make the diversification decision is reduced.

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    File URL: http://hdl.handle.net/10.1080/09603107.2011.639735
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    Article provided by Taylor & Francis Journals in its journal Applied Financial Economics.

    Volume (Year): 22 (2012)
    Issue (Month): 13 (July)
    Pages: 1089-1109

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    Handle: RePEc:taf:apfiec:v:22:y:2012:i:13:p:1089-1109
    DOI: 10.1080/09603107.2011.639735
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