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Modeling the Volatility of Daily Listed Real Estate Returns during Economic Crises: Evidence from Generalized Autoregressive Conditional Heteroscedasticity Models
Institution of Investment Management Center, Happy Life Insurance Co., Ltd., Beijing, 102206, China.
KTH, School of Architecture and the Built Environment (ABE), Real Estate and Construction Management, Real Estate Economics and Finance.ORCID iD: 0000-0003-4849-0726
School of Economics and Finance, Queensland University of Technology, Brisbane City, QLD 4000, Australia.
2024 (English)In: Buildings, E-ISSN 2075-5309, Vol. 14, no 1, article id 182Article in journal (Refereed) Published
Abstract [en]

In this paper, we focus on the dynamic volatility behavior of the daily Swedish Real Estate Sector Index and analyze the existence and degree of a long-range dependence or asymmetric news effect since 2003. More specifically, we give extra attention to the 2007–2008 financial crisis, the 2009–2012 European debt crisis, and the first two years of the global COVID-19 pandemic era (2020–2021). We examine changes in volatility during these extreme events. We apply standard GARCH models, asymmetric GARCH models, and long-memory GARCH models with various error distributions to identify the most accurate volatility models of the daily returns of the Swedish Real Estate Sector Index for the full sample period, January 2003 to June 2021. Our results show that the volatility of the Swedish Real Estate Sector Index is time-varying and highly volatile. The impacts of the global financial crisis, European debt crisis, and COVID-19 pandemic are noticeable. Moreover, the volatility pattern during COVID-19 displays significant time-varying long-range dependence and an asymmetrical news impact, which lead to market inefficiency. Finally, the volatility pattern shows a tendency towards increasing leverage effects and less persistent behavior, indicating that the market stakeholders are highly sensitive to negative returns and becoming quicker to respond to market changes.

Place, publisher, year, edition, pages
MDPI AG , 2024. Vol. 14, no 1, article id 182
Keywords [en]
COVID-19, GARCH models, leverage effect, value-at-risk, volatility forecasting
National Category
Economics
Identifiers
URN: urn:nbn:se:kth:diva-343203DOI: 10.3390/buildings14010182ISI: 001148997500001Scopus ID: 2-s2.0-85183383251OAI: oai:DiVA.org:kth-343203DiVA, id: diva2:1836105
Note

QC 20240212

Available from: 2024-02-08 Created: 2024-02-08 Last updated: 2024-02-13Bibliographically approved

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Song, Han-Suck

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CiteExportLink to record
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