On the hedging benefits of REITs: The role of risk aversion and market states
DOI:
https://doi.org/10.17811/ebl.10.2.2021.126-132Resumen
We propose a dynamic, forward-looking hedging strategy to manage stock market risks via positions in REITs, conditional on the level of risk aversion. Our findings show that REITs do not only offer significant risk reduction for passive portfolios, but also offer much improved risk-adjusted returns with the greatest benefits observed for Australia, Canada and the U.S. Overall, our findings suggest that time-varying risk aversion can be utilized to (i) establish effective hedges against stock market risks via positions in REITS, and (ii) improve the risk-return profile of passive portfolios.
Citas
Ang, A. and Bekaert G. (2002) Regime switches in interest rates, Journal of Business and Economic Statistics, 20, 163-182.
Basher, S. A., Haug, A. A., and Sadorsky, P. (2018) The impact of oil-market shocks on stock returns in major oil-exporting countries, Journal of International Money and Finance, 86, 264–280.
Bekaert, G., Engstrom, E. C. and Xu, N. R. (2017) The time variation in risk appetite and uncertainty.Working Paper.
Brunnermeier, M. and Pedersen, L. (2009) Market liquidity and funding liquidity, Rev. Financ. Stud. 22, 2201–2238.
Campbell, J. Y. and Vuolteenaho, T. (2004) Inflation illusion and stock prices, American Economic Review Papers and Proceedings, 94, 19–23.
Demirer, R., Gkillas, K., Gupta, R. and Pierdzioch, C. (2019) Time-varying risk aversion and realized gold volatility, North American Journal of Economics and Finance, 50 (November), 101048.
Huerta-Sanchez, D. and Escobari, D. (2018) Changes in sentiment on REIT industry excess returns and volatility, Financ Mark Portf Manag, 32, 239-274.
Lee, Y.H. (2014). An international analysis of REITs and stock portfolio management based on dynamic conditional correlation models, Financ Mark Portf Manag, 28, 165-180.
Liow, K.H. and Schindler F. (2014) An asssessment of the relationship between public real estate and stock markets at the local, regional and global levels, International Real Estate Review, 17(2), 157-202.
Ntuli, M. and Akinsomi, O. (2017) An overview of the initial performance of the South African REIT Market, Journal of Real Estate Literature, 25(2), 365-388.
Taderera, M. and Akinsomi, O. (2020) Is commercial real estate a good hedge against inflation? Evidence from South Africa, Research in International Business and Finance, 51, 101096.
Descargas
Publicado
Cómo citar
Número
Sección
Licencia
The works published in this journal are subject to the following terms:
1. Oviedo University Press (the publisher) retains the property rights (copyright) of published works, and encourages and enables the reuse of the same under the license specified in paragraph 2.
© Ediuno. Ediciones de la Universidad de Oviedo / Oviedo University Press
2. The works are published in the online edition of the journal under a Creative Commons Attribution-Non Commercial-Non Derives 3.0 Spain (legal text). You can copy, use, distribute, transmit and publicly display, provided that: i) you cite the author and the original source of publication (journal, publisher and URL of the work), ii) they are not used for commercial purposes, iii) mentions the existence and specifications of this license.
3. Conditions of self-archiving. The author can archive the post-print version of the article (publisher’s version) on the author’s personal website and/or on the web of the institution where he belong, including a link to the page of the journal and putting the way of citation of the work. Economics and Business Letters and its URL https://reunido.uniovi.es/index.php/EBL/index are the only authorized source for correctly giving the reference of the publisher’s version in every mention of the article.
