Change search
CiteExportLink to record
Permanent link

Direct link
Cite
Citation style
  • apa
  • ieee
  • modern-language-association-8th-edition
  • vancouver
  • Other style
More styles
Language
  • de-DE
  • en-GB
  • en-US
  • fi-FI
  • nn-NO
  • nn-NB
  • sv-SE
  • Other locale
More languages
Output format
  • html
  • text
  • asciidoc
  • rtf
Investigating the Long- and the Short-Run Diversification Potential of REITs for Private Investors
Linköping University, Department of Management and Engineering.
Linköping University, Department of Management and Engineering.
2019 (English)Independent thesis Advanced level (degree of Master (One Year)), 20 credits / 30 HE creditsStudent thesisAlternative title
En studie av REITs långsiktiga och kortsiktiga diversifieringspotential för privatinvesterare (Swedish)
Abstract [en]

Real estate is commonly viewed as a good diversification tool since the real estate market cycle exhibit low correlations to other asset classes. Moreover, Real Estate Investment Trusts (REITs) have become increasingly popular in the past decades since this investment form offers private investors a convenient way of diversifying stock portfolios with real estate. Some studies investigating the within-country diversification potential of REITs and stocks have been performed. These studies generally suggest poor diversification potential. Hence, we investigate the international diversification potential of REITs from Europe, Asia Pacific and the US for private investors holding European stocks from 2007 to 2019. For Europe and Asia Pacific, REIT markets with different maturity levels are included since emerging and developed REIT markets might have different characteristics affecting the diversification potential. We also examine which market leads which in terms of changes in returns. Moreover, the diversification potential of REITs may depend on the investment horizon, hence the long- and short-run perspectives for private investors are examined. The lesson learned from the Global Financial Crises and European Debt Crisis is that abnormal market conditions may change the behavior of assets on the financial markets, and significantly affect portfolio behavior. Hence, diversification potential in relation to crises is also considered. The methods employed are Johansen’s cointegration, Granger non-causality and DCC-GARCH. Our findings suggest long- and short-run diversification potential of international REITs for European stocks. Cross-regional combinations of REITs and stocks generally offer better diversification potential than within-regional combinations, and emerging REIT markets are preferred over their developed counterparts due to lower conditional correlations. Moreover, changes in stock market returns lead changes in REIT market returns, indicating that stock markets react more quickly to new information on the market. Long- and short-run diversification potential still exists during the crises although increased conditional correlations suggest higher interdependence in this period. However, there is no trend of increasing conditional correlations over the whole sample, suggesting the abnormal market conditions during the financial turmoil did not permanently change the diversification potential of REITs in stock portfolios.

Place, publisher, year, edition, pages
2019. , p. 61
Keywords [en]
REIT, Portfolio Diversification, DCC-GARCH, Johansen’s Cointegration, Granger Causality
National Category
Economics
Identifiers
URN: urn:nbn:se:liu:diva-160268ISRN: LIU-IEI-FIL-A--19/03117--SEOAI: oai:DiVA.org:liu-160268DiVA, id: diva2:1351558
Subject / course
Master Thesis in Economics
Supervisors
Examiners
Available from: 2019-09-16 Created: 2019-09-16 Last updated: 2019-09-16Bibliographically approved

Open Access in DiVA

fulltext(3829 kB)7 downloads
File information
File name FULLTEXT01.pdfFile size 3829 kBChecksum SHA-512
08950ad5d8dcc0161ea187286103d1738267a313856c7aab64e6604a5267f24cc72fedb813a9ae1f6a403411bf9c24c7940686e073ad009f20e45c04b251f953
Type fulltextMimetype application/pdf

By organisation
Department of Management and Engineering
Economics

Search outside of DiVA

GoogleGoogle Scholar
Total: 7 downloads
The number of downloads is the sum of all downloads of full texts. It may include eg previous versions that are now no longer available

urn-nbn

Altmetric score

urn-nbn
Total: 26 hits
CiteExportLink to record
Permanent link

Direct link
Cite
Citation style
  • apa
  • ieee
  • modern-language-association-8th-edition
  • vancouver
  • Other style
More styles
Language
  • de-DE
  • en-GB
  • en-US
  • fi-FI
  • nn-NO
  • nn-NB
  • sv-SE
  • Other locale
More languages
Output format
  • html
  • text
  • asciidoc
  • rtf