ARE TAIL BEHAVIORS OF REAL ESTATE INVESTMENT TRUSTS ANOMALOUS? EVIDENCE FROM EXTREME VALUE THEORY

Ming-Chu Chiang ； I-Chun Tsai

《Advances in Financial Planning and Forecasting》 7期 (2016/10) Pp. 253-285

https://doi.org/10.6292/AFPF.2016.07.12

摘要

This study investigates the defensiveness of real estate investment trusts (REITs) in the United States, focusing on the extreme risks embedded in the tails of REIT return distributions. Empirical evidence suggests that the increased popularity of REITs among large institutional investors and several changes in the legislation and taxation structures before 1999 aided in enlarging the REIT market size and substantially increased the downside risk of REIT returns. Anomalous REIT behavior started in 1999. Specifically, REIT market risks increased abruptly in 1999 ~ 2000 and steadily increased until they plateaued in 2006, remaining level until the financial crisis began in 2007. Without noticing the reverse behavior of risk in the REIT market, investors in fact placed their position in a no longer defensive security during that period. Thus, timely monitoring and accurate REIT risk prediction are essential for retail investors, institutional investors, fund managers, and even legislators. The findings of this study reveal that extreme value theory more favorably predicts the Value at Risk (VaR) of REITs during periods of crisis than does a model under the normality assumption.

關鍵字

Real Estate Investment Trusts ； Structural Change ； Extreme Value Theory ； Value at Risk ； Subprime Mortgage Crisis

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