Uncertainty Due to Infectious Diseases and Forecastability of the Realized Variance of United States Real Estate Investment Trusts: A Note

Matteo Bonato; Oguzhan Cepni; Rangan Gupta; Christian Pierdzioch

doi:10.1111/irfi.12357

Uncertainty Due to Infectious Diseases and Forecastability of the Realized Variance of United States Real Estate Investment Trusts: A Note

Matteo Bonato, Oguzhan Cepni, Rangan Gupta, Christian Pierdzioch^*

^*Corresponding author for this work

Department of Economics

Research output: Contribution to journal › Letter › peer-review

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Abstract

We examine the forecasting power of a daily newspaper‐based index of uncertainty associated with infectious diseases (EMVID) for real estate investment trusts (REITs) realized market variance of the United States (US) via the heterogeneous autoregressive realized volatility (HAR‐RV) model. Our results show that the EMVID index improves the forecast accuracy of realized variance of REITs at short‐, medium‐, and long‐run horizons in a statistically significant manner, with the result being robust to the inclusion of additional controls (leverage, realized jumps, skewness, and kurtosis) capturing extreme market movements, and also carries over to 10 sub‐sectors of the US REITs market. Our results have important portfolio implications for investors during the current period of unprecedented levels of uncertainty resulting from the outbreak of COVID‐19.

Original language	English
Journal	International Review of Finance
Volume	22
Issue number	3
Pages (from-to)	540-550
Number of pages	11
ISSN	1369-412X
DOIs	https://doi.org/10.1111/irfi.12357
Publication status	Published - Sept 2022

Keywords

Forecasting
Infectious diseases
Realized variance
REITs
Uncertainty

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title = "Uncertainty Due to Infectious Diseases and Forecastability of the Realized Variance of United States Real Estate Investment Trusts: A Note",

abstract = "We examine the forecasting power of a daily newspaper‐based index of uncertainty associated with infectious diseases (EMVID) for real estate investment trusts (REITs) realized market variance of the United States (US) via the heterogeneous autoregressive realized volatility (HAR‐RV) model. Our results show that the EMVID index improves the forecast accuracy of realized variance of REITs at short‐, medium‐, and long‐run horizons in a statistically significant manner, with the result being robust to the inclusion of additional controls (leverage, realized jumps, skewness, and kurtosis) capturing extreme market movements, and also carries over to 10 sub‐sectors of the US REITs market. Our results have important portfolio implications for investors during the current period of unprecedented levels of uncertainty resulting from the outbreak of COVID‐19.",

keywords = "Forecasting, Infectious diseases, Realized variance, REITs, Uncertainty, Forecasting, Infectious diseases, Realized variance, REITs, Uncertainty",

author = "Matteo Bonato and Oguzhan Cepni and Rangan Gupta and Christian Pierdzioch",

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T1 - Uncertainty Due to Infectious Diseases and Forecastability of the Realized Variance of United States Real Estate Investment Trusts

T2 - A Note

AU - Bonato, Matteo

AU - Cepni, Oguzhan

AU - Gupta, Rangan

AU - Pierdzioch, Christian

PY - 2022/9

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N2 - We examine the forecasting power of a daily newspaper‐based index of uncertainty associated with infectious diseases (EMVID) for real estate investment trusts (REITs) realized market variance of the United States (US) via the heterogeneous autoregressive realized volatility (HAR‐RV) model. Our results show that the EMVID index improves the forecast accuracy of realized variance of REITs at short‐, medium‐, and long‐run horizons in a statistically significant manner, with the result being robust to the inclusion of additional controls (leverage, realized jumps, skewness, and kurtosis) capturing extreme market movements, and also carries over to 10 sub‐sectors of the US REITs market. Our results have important portfolio implications for investors during the current period of unprecedented levels of uncertainty resulting from the outbreak of COVID‐19.

AB - We examine the forecasting power of a daily newspaper‐based index of uncertainty associated with infectious diseases (EMVID) for real estate investment trusts (REITs) realized market variance of the United States (US) via the heterogeneous autoregressive realized volatility (HAR‐RV) model. Our results show that the EMVID index improves the forecast accuracy of realized variance of REITs at short‐, medium‐, and long‐run horizons in a statistically significant manner, with the result being robust to the inclusion of additional controls (leverage, realized jumps, skewness, and kurtosis) capturing extreme market movements, and also carries over to 10 sub‐sectors of the US REITs market. Our results have important portfolio implications for investors during the current period of unprecedented levels of uncertainty resulting from the outbreak of COVID‐19.

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KW - Infectious diseases

KW - Realized variance

KW - REITs

KW - Uncertainty

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