On the Dynamics of International Real-Estate-Investment Trust-Propagation Mechanisms: Evidence from Time-Varying Return and Volatility Connectedness Measures

Keagile Lesame; Elie Bouri; David Gabauer; Rangan Gupta

doi:10.3390/e23081048

On the Dynamics of International Real-Estate-Investment Trust-Propagation Mechanisms: Evidence from Time-Varying Return and Volatility Connectedness Measures

Entropy (Basel). 2021 Aug 14;23(8):1048. doi: 10.3390/e23081048.

Authors

Keagile Lesame¹, Elie Bouri², David Gabauer³, Rangan Gupta¹

Affiliations

¹ Department of Economics, University of Pretoria, Pretoria 0002, South Africa.
² Adnan Kassar School of Business, Lebanese American University, Beirut 13-5053, Lebanon.
³ Data Analysis Systems, Software Competence Center Hagenberg, 4232 Hagenberg, Austria.

Abstract

In this paper, we investigate the time-varying interconnectedness of international Real Estate Investment Trusts (REITs) markets using daily REIT prices in twelve major REIT countries since the Global Financial Crisis. We construct dynamic total, net total and net pairwise return and volatility connectedness measures to better understand systemic risk and the transmission of shocks across REIT markets. Our findings show that that REIT market interdependence is dynamic and increases significantly during times of heightened uncertainty, including the COVID-19 pandemic. We also find that the US REIT market along with major European REITs are generally sources of shocks to Asian-Pacific REIT markets. Furthermore, US REITs appear to dominate European REITs. These findings highlight that portfolio diversification opportunities decline during times of market uncertainty.

Keywords: REITs; TVP-VAR; dynamic connectedness.