The Sources of Risk Spillovers Among U.S. REITs : Financial Characteristics and Regional Proximity

Item Type Journal paper
Abstract

In this paper, we estimate the risk spillovers among 74 U.S. REITs using the statedependent sensitivity value-at-risk (SDSVaR) approach. This methodology allows for the quantification of the spillover size as a function of a company's financial condition (tranquil, normal, and volatile REIT prices). We show that the size of risk spillovers is more than twice as large when REITs are in financial distress and find evidence for the impact of geographical proximity: REITs that have their properties located in close distance to the properties of other REITs show risk spillovers that are on average 33% higher than REITs that have similar properties but at a larger distance. We estimate the risk gradient to decrease nonlinearly and to have zero slope for property distances of more than 250 miles. Our empirical findings provide first empirical evidence on the transmission of risk spillovers from underlying real positions to the securitized level of a company.
Specifically, our results provide new insights concerning the relevance of geographical diversification for REITs and have important implications for the investment and risk management decisions of real estate investors, mortgage lenders, home suppliers, and policy makers.

Authors Adams, Zeno; Füss, Roland & Schindler, Felix
Journal or Publication Title Real Estate Economics
Language English
Keywords REITs, fundamental value, geographic diversification, information diffusion, risk spillovers, state-dependent sensitivity VaR (SDSVaR)
Subjects business studies
HSG Classification contribution to scientific community
Refereed Yes
Date 2015
Publisher AREUEA
Place of Publication Bloomington, Ind.
Volume 43
Number 1
Page Range 67-100
Number of Pages 34
ISSN 1080-8620
ISSN-Digital 1540-6229
Publisher DOI 10.1111/1540-6229.12060
Depositing User Prof. Dr. Zeno Adams
Date Deposited 01 Oct 2013 11:58
Last Modified 23 Aug 2016 11:17
URI: https://www.alexandria.unisg.ch/publications/226012

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Citation

Adams, Zeno; Füss, Roland & Schindler, Felix (2015) The Sources of Risk Spillovers Among U.S. REITs : Financial Characteristics and Regional Proximity. Real Estate Economics, 43 (1). 67-100. ISSN 1080-8620

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https://www.alexandria.unisg.ch/id/eprint/226012
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