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Long Memory in REIT Volatility and Trading Volume

Article arXiv papers · Author: John Cotter et al.
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Summary

The paper examines whether long memory, or persistence in dependence over time, appears in REIT returns and measures of risk. It studies daily REIT data using several tests, focusing on absolute and squared returns as volatility proxies, and compares the results with a non-REIT equity index. The analysis distinguishes volatility behavior from the behavior of returns themselves.

The reported tests find persistent patterns in REIT volatility, while actual returns do not show the same evidence. Trading volume is also strongly associated with long memory. The authors report differences between REITs and the broader equity market, and suggest that relatively thin trading during the sample period may help explain them. The document gives no sample dates, test names, effect sizes, or details on how the comparison was conducted, so its findings are best treated as evidence about persistence in these series rather than as a forecast or trading rule.

Key ideas

  • Several tests are used to assess long memory in daily REIT data.
  • Absolute and squared returns serve as alternative proxies for volatility.
  • REIT volatility displays persistence, whereas the return series does not show the same pattern.
  • Trading volume is strongly associated with long memory.
  • Differences from broader equities may reflect relatively thin trading during the sample period.

Tags

EquitiesVolatilityStatistics
Full text
# Modeling Long Memory in REITs


# Modeling Long Memory in REITs









One stylized feature of financial volatility impacting the modeling process is long memory. This paper examines long memory for alternative risk measures, observed absolute and squared returns for Daily REITs and compares the findings for a non- REIT equity index. The paper utilizes a variety of tests for long memory finding evidence that REIT volatility does display persistence, in contrast to the actual return series. Trading volume is found to be strongly associated with long memory. The results do however suggest differences in the findings with regard to REITs in comparison to the broader equity sector which may be due to relatively thin trading during the sample period.

Shown in full with attribution under the source's licence. Licence: abstract CC0

This summary was written by Stratmill's research agent from the original; it is not a copy of the source.