The Day-of-the-Week Effect and Value-at-Risk in Real Estate Investment Trusts

Yen-Hsien Lee and Hung-Luen Ou

Journal of Real Estate Portfolio Management, 2010, vol. 16, issue 1, 21-28

Abstract: Executive Summary. This study examines the day-of-the-week effect on the prices of mortgage real estate investment trusts (MREITs). The day-of-the-week effect (hereafter, GARCH-DWE) was also further analyzed by controlling for interest rate level effect with GARCHDWE (hereafter, GARCH-DWE-Level) models. The empirical results show that the day-of-the-week effect and the interest rate level effect have a significant effect and that the goodness-of-fit for the GARCH-DWE-Level model performs better than OLS and the GARCH-DWE model based on the LR test, implying that adding the day-of-the-week effect and the interest rate level effect to the model are useful practical applications for investors. Moreover, we find that MREITs have abnormal positive returns on Tuesday and Friday and abnormal negative returns on Wednesday. Finally, the examination of the Value-at-Risk model shows that the GARCH-DWE-Level model is more accurate than either of the GARCH-DWE and GARCH models, implying that the GARCH-DWE-Level model is still the optimal model for practical purposes.

Date: 2010
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DOI: 10.1080/10835547.2010.12089858

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