Modelling and forecasting volatility of daily listed real estate returns focusing on periods of economic crises : Evidence from GARCH models

• In this paper, we focus on the dynamic volatility behaviour of the daily Swedish real estate sector index and analyse the existence and degree of long-range dependence or asymmetric news effect since 2003. More specifically, we give extra attention to the 2007-2008 financial crisis, the 2009-2012 European debt crisis, and the ongoing global COVID-19 pandemic and examine changes in volatility during these extreme events. In particular, we apply standard GARCH models, asymmetric GARCH models and long memory GARCH models, with various error distributions to identify the most accurate volatility models of the daily returns of the Swedish Real Estate Sector Index for the full sample period, January 2003 to June 2021.Our results show that the volatility of the Swedish real estate sector index is time-varying and highly volatile. The impact of the Global financial crisis, European Debt Crisis and COVID-19 pandemic is noticeable. Moreover, the volatility pattern during COVID-19 displays significant time-varying long-range dependence and asymmetrical news impact, which leads to market inefficiency. The volatility pattern shows there is a tendency towards increasing leverage effects and less persistent behaviour, indicating that the market stakeholders are highly sensitive to negative returns and much quicker to respond to market changes.  

Ämnesord

SAMHÄLLSVETENSKAP  -- Ekonomi och näringsliv -- Nationalekonomi (hsv//swe)

SOCIAL SCIENCES  -- Economics and Business -- Economics (hsv//eng)

Nyckelord

Volatility forecasting

GARCH models

Value-at-Risk

Leverage effect

COVID-19

Economics

Nationalekonomi

Publikations- och innehållstyp

vet (ämneskategori)

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