Diversification Strategies during Asset Crises: REIT-Stock Tail Dependence

• Main Authors: Shih-Min Liu, 劉世民
• Other Authors: Chih-ChiangWu
• Format: Others
• Language: en_US
• Online Access: http://ndltd.ncl.edu.tw/handle/46018143673214770867

碩士 === 元智大學 === 商學碩士班(財務金融學程) === 100 === The study sheds insight into time-varying cross-asset linkages and asset-allocation strategies by investigating co-movements between REIT (real estate securitized trust) and stock price returns, spotlighting the recent decade with remarkable real estate cycles and asset crises. We propose a range-based volatility model with a dynamic copula function in order to characterize asset price volatility and cross-asset dependence structures. We further conduct out-of sample forecasts of the economic values based on the asset-allocation problem, and find a sustainable swing in REIT-stock lower tail dependence during 2008-2009. The findings suggest that the range-based volatility (asymmetric CARR) model is superior to the return-based (GJR- GARCH) framework since risk-averse investors are willing to pay more fees to switch from the dynamic portfolios based on the latter to those based on the former. We provide evidence of positive economic values of the dynamic strategies, and indicate the challenge of significantly explaining cross-asset linkages in asset busts: only the mortgage spread is informative in explaining REIT-stock upper tail dependence from a forward-looking perspective.