Are Real Estate Investment Trusts Becoming More Dangerous? Evidence from the Asian Markets

I-Chun Tsai (), Ai Chi Hsu and Ming-Chi Chen
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I-Chun Tsai: Department of Finance, National University of Kaohsiung, Taiwan
Ai Chi Hsu: Department of Finance, National Yunlin University of Science & Technology, Taiwan
Ming-Chi Chen: Department of Finance, National Sun Yat-sen University, Taiwan

Journal of Economics and Management, 2010, vol. 6, issue 2, 271-298

Abstract: In 2007, a number of stock funds and Real Estate Investment Trusts (REITs) tended to invest in Asian markets due to their outstanding performance during the period prior to 2006. However, can this move increase the covariate between the stock and REIT markets in Asian markets as well as further increase the risk in REIT markets? To address this, the research uses the multivariate GARCH model to estimate the correlation between the stock and the REIT markets in Japan, Singapore, Malaysia, Hong Kong, Taiwan, and Thailand separately. The empirical results show that the correlations between the REITs and stock markets all increased in these areas after 2007. This phenomenon shows that the advantage of REITs is disappearing in Asian markets. Our results seek to provide useful advice for investors, with our recommendation that investors need to reexamine the risk when they want to enter a market due to its outstanding performance, since the risk feature of the market may have changed after other investors have also chased the returns.

Keywords: returns-chasing; covariance; systematic risk; Asian markets (search for similar items in EconPapers)
JEL-codes: G11 G15 G32 (search for similar items in EconPapers)
Date: 2010
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