Volatility Transmission: Evidence from U.K. REIT & Stock Market Implied Volatility

Mutale Katyoka and Simon Stevenson

Journal of Real Estate Portfolio Management, 2024, vol. 30, issue 1, 20-35

Abstract: This paper investigates volatility transmission in the U.K. REIT market. It considers how REIT volatility is related to implied volatility in both the overall stock market as well as that derived from traded options on REIT stocks. The multivariate analysis utilizes both Constant Conditional Correlation (CCC) and Dynamic Conditional Correlation (DCC) GARCH specifications to analyse the interdependence of the data. The findings confirm the presence of volatility transmission across the implied volatility of U.K. REITs, the U.K. implied volatility index, and the U.K. REIT index. The study also applies the variance decomposition approach proposed by Diebold and Yilmaz to examine spillover effects.

Date: 2024
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DOI: 10.1080/10835547.2023.2232118

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