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Forecasting international REITs volatility: the role of oil-price uncertainty

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  • Jiqian Wang
  • Rangan Gupta
  • Oğuzhan Çepni
  • Feng Ma

Abstract

We forecast realized variance (RV) of Real Estate Investment Trusts for 10 leading markets and regions, derived from 5-minutes-interval intraday data, based on the information content of two alternative metrics of daily oil-price uncertainty. Based on the period of the analysis covering January 2008 to July 2020, and using variants of the popular MIDAS-RV model, augmented to include oil market uncertainties, captured by its RV (also derived from 5-minute intraday data) and implied volatility (i.e. the oil VIX), we report evidence of significant statistical and economic gains in the forecasting performance. The result is robust to the size of the forecasting samples, including that of the COVID-19 period, lag-length, nonlinearities, asymmetric effects, and forecast horizon. Our results have important implications for investors and policymakers.

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  • Jiqian Wang & Rangan Gupta & Oğuzhan Çepni & Feng Ma, 2023. "Forecasting international REITs volatility: the role of oil-price uncertainty," The European Journal of Finance, Taylor & Francis Journals, vol. 29(14), pages 1579-1597, September.
    • Handle: RePEc:taf:eurjfi:v:29:y:2023:i:14:p:1579-1597
    DOI: 10.1080/1351847X.2022.2137422
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    2. Zeng, Qing & Zhang, Jixiang & Zhong, Juandan, 2024. "China's futures market volatility and sectoral stock market volatility prediction," Energy Economics, Elsevier, vol. 132(C).

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    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • C53 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Forecasting and Prediction Models; Simulation Methods
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • Q02 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - General - - - Commodity Market

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