Diversification Power of Real Estate Market Securities

The Role of Financial Crisis and Dividend Policy

Metin Ilbasmis, Marc Gronwald, Yuan Yuan Zhao

Research output: Working paperDiscussion paper

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Abstract

This paper investigates dynamic conditional correlations between stock and REIT markets in both Turkey and the U.S. We use an Asymmetric DCC - GJR - GARCH model to estimate the dynamic conditional correlation at daily, weekly, and monthly frequencies. Our contribution is threefold. First, we find a that downward trend in the daily conditional correlation in the Turkish market, which is contrary to the literature, while the upward trend in the correlation of the two U.S. markets is consistent with the literature. Second, we observe that the trend in the correlation changes the direction with the 2008 Global Financial Crisis. The negative trend in Turkish market becomes positive and the positive trend in the U.S. market becomes negative after the crisis, which could indicate a structural break in the REIT market caused by the crisis. Third, we find that the dividend policy of REITs plays an important role on the dynamics of the correlation. Dividend payments by Turkish REITs decrease their conditional correlation with the Turkish stock market while no such relationship is detected in the U.S. We argue that both the relationship between dividend payments by REITs and REIT correlation with the stock index is associated with the different regulatory environment of REITs in Turkey.
Original languageEnglish
PublisherUniversity of Aberdeen Business School
Number of pages46
Publication statusPublished - 5 May 2018

Publication series

NameDiscussion Paper in Economics
PublisherUniversity of Aberdeen
No.4
Volume18
ISSN (Electronic)0143-4543

Fingerprint

Real estate market
Real estate investment trusts
Financial crisis
Dividend policy
Diversification
Turkey
Payment
Dividends
Dynamic conditional correlation
Conditional correlation
Structural breaks
Stock index
Stock market
Global financial crisis
Regulatory environment
GJR-GARCH Model

Keywords

  • REITs
  • Equity
  • Correlations
  • DCC-GARCH
  • Deterministic Trend
  • Dividend Policy

ASJC Scopus subject areas

  • Economics, Econometrics and Finance (miscellaneous)

Cite this

Ilbasmis, M., Gronwald, M., & Zhao, Y. Y. (2018). Diversification Power of Real Estate Market Securities: The Role of Financial Crisis and Dividend Policy. (Discussion Paper in Economics; Vol. 18, No. 4). University of Aberdeen Business School.

Diversification Power of Real Estate Market Securities : The Role of Financial Crisis and Dividend Policy. / Ilbasmis, Metin; Gronwald, Marc; Zhao, Yuan Yuan.

University of Aberdeen Business School, 2018. (Discussion Paper in Economics; Vol. 18, No. 4).

Research output: Working paperDiscussion paper

Ilbasmis, M, Gronwald, M & Zhao, YY 2018 'Diversification Power of Real Estate Market Securities: The Role of Financial Crisis and Dividend Policy' Discussion Paper in Economics, no. 4, vol. 18, University of Aberdeen Business School.
Ilbasmis M, Gronwald M, Zhao YY. Diversification Power of Real Estate Market Securities: The Role of Financial Crisis and Dividend Policy. University of Aberdeen Business School. 2018 May 5. (Discussion Paper in Economics; 4).
Ilbasmis, Metin ; Gronwald, Marc ; Zhao, Yuan Yuan. / Diversification Power of Real Estate Market Securities : The Role of Financial Crisis and Dividend Policy. University of Aberdeen Business School, 2018. (Discussion Paper in Economics; 4).
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