Time-Varying Risk Premia for Size Effects on Equity REITS

Guangdi Chang and Yi-Tsuo Chang

The International Journal of Business and Finance Research, 2013, vol. 7, issue 4, 13-28

Abstract: We examine if the risk premia of the size effect on equity REITs (EREITs) are time-varying by using GARCH models. We also investigate how macroeconomic factors affect the size premia. We reexamine the size effect by using Fama-French three-factor model to demonstrate that the size effect exists in EREITs market. We investigate time-varying volatility for size effect by using a sample of publicly traded EREITs with GARCH family models. We find variation of the size premia partially results from volatility the bond market term spread and the volatility of short-term interest rates. The unexpected shock from fluctuation of the bond market term spread lowers the volatility of the size premia on EREITs return. We also find the big-sized EREITs are a good investment when default risk premium fluctuates dramatically.

Keywords: Equity REITs; Size Effect; GARCH; VAR; Volatility; Leverage Effect (search for similar items in EconPapers)
JEL-codes: E52 G12 G32 (search for similar items in EconPapers)
Date: 2013
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Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:ibf:ijbfre:v:7:y:2013:i:4:p:13-28

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