The dynamics of returns and volatility in the emerging and developed Asian REIT markets

This paper examines the dynamics of return and volatility spillovers across the REIT markets of Japan, Singapore, Hong Kong, Malaysia, Taiwan, Thailand, and South Korea from June 2006 to May 2011. The emerging markets offer lower returns than the developed markets but lower risk as well. The emerging REIT index outperformed the developed REIT index on a risk-adjusted basis. The analysis suggests that correlations among Asian REIT markets are relatively low, ranging from 0.14 to 0.42 over the full-sample period. The results further indicate that correlations among emerging REIT markets are lower than that among developed markets. However, correlations are non-constant over time and increased during the recent Global Financial Crisis. The results from the EGARCH models show that there is a strong tendency for REIT returns to transmit from developed markets (e.g., Japan and Singapore) to emerging REIT markets. In regard to volatility transmission, the mechanism appears to be multidirectional.