Dynamic correlations across REIT sub-sectors
Chong, J., Krystalogianni, A. and Stevenson, S. (2011) Dynamic correlations across REIT sub-sectors. Working Papers in Real Estate & Planning. 04/11. Working Paper. University of Reading, Reading. pp38.
The issue of whether Real Estate Investment Trusts should pursue a focused or diversified investment strategy remains an ongoing debate within both the academic and industry communities. This paper considers the relationship between REITs focused on different property sectors in a GARCH-DCC framework. The daily conditional correlations reveal that since 1990 there has been a marked upward trend in the coefficients between US REIT sub-sectors. The findings imply that REITs are behaving in a far more homogeneous manner than in the past. Furthermore, the argument that REITs should be focused in order that investors can make the diversification decision is reduced.
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