Volatility Targeting for U.S. Equity REITs: A Strategy for Minimizing Extreme Downside Risk?

Cay Oertel

Journal of Real Estate Portfolio Management, 2021, vol. 27, issue 1, 63-77

Abstract: The study examines the feasibility of Volatility Targeting (VT) to minimize extreme downside risk for U.S. Equity REITs. The empirical study applies a two-stage approach. First, a backtest of buy-and-hold, and VT based on various volatility estimators for each equity REIT security between 1999 and 2019, is performed. Subsequently, a mean-CVaR-optimization for different equity REIT subclasses is carried out. The present study finds CVaR reductions of VT in comparison to buy-and-hold across all subclasses, as well as the entire sample. Interestingly, these improvements differ across the REIT subclasses and volatility estimators.

Date: 2021
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DOI: 10.1080/10835547.2021.1971930

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