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Forecasting International REITs Volatility: The Role of Oil-Price Uncertainty

Author

Listed:
  • Jiqian Wang

    (School of Economics and Management, Southwest Jiaotong University, Chengdu, China)

  • Rangan Gupta

    (Department of Economics, University of Pretoria, Private Bag X20, Hatfield 0028, South Africa)

  • Oguzhan Cepni

    (Copenhagen Business School, Department of Economics, Porcelaenshaven 16A, Frederiksberg DK-2000, Denmark; Central Bank of the Republic of Turkey, Haci Bayram Mah. Istiklal Cad. No:10 06050, Ankara, Turkey)

  • Feng Ma

    (School of Economics and Management, Southwest Jiaotong University, Chengdu, China)

Abstract

We forecast realized variance (RV) of Real Estate Investment Trusts (REITs) for ten 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, jump risks, lag-length, nonlinearities, and asymmetric effects, and forecast horizon. Our results have important implications for investors and policymakers.

Suggested Citation

  • Jiqian Wang & Rangan Gupta & Oguzhan Cepni & Feng Ma, 2021. "Forecasting International REITs Volatility: The Role of Oil-Price Uncertainty," Working Papers 202173, University of Pretoria, Department of Economics.
    • Handle: RePEc:pre:wpaper:202173
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    More about this item

    Keywords

    REITs; International data; Realized volatility; Oil-Price Uncertainty; Forecasting;
    All these keywords.

    JEL classification:

    • 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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