Feedback trading strategies and long-term volatility

Maria I. Kyriakou, Vassilios Babalos, Apostolos Kiohos and Athanasios Koulakiotis

The Quarterly Review of Economics and Finance, 2020, vol. 76, issue C, 181-189

Abstract: The aim of the present study is to examine securitized real estate market efficiency under a new perspective. We begin by investigating the effect of feedback trading strategies on long-term market volatility of three hypothetical portfolios of securitized real estate markets. To this end, the original FIGARCH and an extended GJR-FIGARCH methodology are employed. Our results reveal that positive feedback trading occurs across the three portfolios casting doubt on real estate market efficiency. Moreover, evidence against effciency is amplified by the documented volatility asymmetry. During the recent global financial crisis, the European portfolio of Italy and Sweden favors negative (symmetric and asymmetric) strategies with volatility (symmetric and asymmetic) being present and affecting the autocorelation of portfolio returns. Our results entail significant implications for market regulators and investors.

Keywords: Feedback trading; Long-memory volatility; Real estate markets; Financial crisis; Market risk analysis (search for similar items in EconPapers)
JEL-codes: C5 G1 R2 (search for similar items in EconPapers)
Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:quaeco:v:76:y:2020:i:c:p:181-189

DOI: 10.1016/j.qref.2019.05.011

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