Journal of Risk

Real estate investment trust return dynamics and value-at-risk under alternative classes of model specifications

Jung-Suk Yu


This study compares the statistical and economic performances of two broad classes of model specifications for real estate investment trust (REIT) index returns. Empirical results suggest that the class of fat-tailed distributions, represented by the skewed t model with asymmetric generalized autoregressive conditional heteroscedasticity (GARCH), is more suitable for modeling REIT return dynamics than the new class of GARCH-jump models. We find that the superiority of the asymmetric fat-tailed (AFT) distributions stems from their ability to match the higher-order moments and high peaks around zero returns simultaneously. In addition, the value at-risk (VaR) analysis based on backtesting comparisons and out-of-sample forecasting indicates that the class of AFT distributions is a more effective risk management tool, because skewed models are capable of achieving the smallest number and magnitude of violations of the VaR compared to the GARCH-jump models. This finding was particularly important for the market turbulence during the 2008-9 crises.

Sorry, our subscription options are not loading right now

Please try again later. Get in touch with our customer services team if this issue persists.

New to View our subscription options

You need to sign in to use this feature. If you don’t have a account, please register for a trial.

Sign in
You are currently on corporate access.

To use this feature you will need an individual account. If you have one already please sign in.

Sign in.

Alternatively you can request an individual account here