Addae-Dapaah, K; Abdullah, K; (2020) Cross Hedging Effectiveness of Real Estate Securities Exchange Traded Funds. Journal of Real Estate Portfolio Management , 26 (1) pp. 74-100. 10.1080/10835547.2020.1826240.

Preview

Text JREPM_ETFHEDGEfin_MwithRef_NewFormat1A1.pdf - Accepted Version Download (743kB) | Preview

Abstract

We investigate hedging effectiveness of four REIT Exchange Traded Funds in hedging seven real estate securities returns for the United States, Europe, and Asia through R-Squared, hedge ratio, variance reduction (VR) and utility maximization metrics. The analyses cover different full sample and sub-sample periods from 2000 to 2010 (inclusive) to document the performances of the hedge during periods of high and low volatility. The results show that the ETFs were very effective in hedging EREIT and all the sampled real estate securities in Europe and Asia. Second, VECM hedge marginally outperformed OLS hedge. Third, we find that hedging effectiveness evidenced by VR does not necessarily equate to economic viability. Therefore VR must be used together with UIs to determine viability of hedging effectiveness. Finally, given different levels of risk aversion vis-à-vis expected utility, it is advisable/inadvisable to hedge during high/low volatility periods.

Download activity - last month

Export as JSONCSVXML

Download activity - last 12 months

Export as JSONCSVXML

Downloads by country - last 12 months

Export as CSVXMLJSON

Archive Staff Only

View Item