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Low‐frequency volatility of real estate securities and macroeconomic risk

Chyi Lin Lee, Simon Stevenson () and Ming‐Long Lee

Accounting and Finance, 2018, vol. 58, issue S1, 311-342

Abstract: Real estate securities have distinct characteristics that differentiate them from stocks generally. Key amongst them is that underpinning the firms are both real and investment assets. Therefore, the connections between the underlying macroeconomy and listed real estate firms are of heightened importance. To consider the linkages with macroeconomic fundamentals, we extract the ‘low‐frequency’ volatility component from aggregate volatility shocks in 11 international securitised real estate markets using Engle and Rangel's (2008) Spline‐GARCH model. The analysis reveals that the low‐frequency volatility of real estate securities has strong and positive association with most of the macroeconomic risk proxies examined. Differences between real estate securities and common stocks have also been identified.

Date: 2018
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Handle: RePEc:bla:acctfi:v:58:y:2018:i:s1:p:311-342