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PurposeWe examined the dynamic volatility connectedness and diversification strategies among US real estate investment trusts (REITs) and green finance indices.Design/methodology/approachThe DCC-GARCH dynamic connectedness framework and he DCC-GARCH t-copula model were employed in this study.FindingsUsing daily data from 2,206 observations spanning from 2 January 2015 to 31 January 2023 this paper presents the following findings: (1) cross-market spillovers exhibited a high correlation and significant fluctuations, particularly during extreme events; (2) our analysis confirmed that REIT acted as net receivers from other green indices, with the S&P North America Large-MidCap Carbon Efficient Index dominating the in-network volatility spillover; (3) this observation suggests asymmetric spillovers between the two markets and (4) a portfolio analysis was conducted using the DCC-GARCH t-copula framework to estimate hedging ratios and portfolio weights for these indices. When REIT and the Dow Jones US Select ESG REIT Index were simultaneously added to a risk-hedged portfolio, our findings indicated that no risk-hedging effect could be achieved. Moreover, the cost and performance of hedging green assets using REIT were found to be comparable.Originality/valueWe first examined the dynamic volatility connectedness and diversification strategies among US REITs and green finance indices. The outcomes of this study carry practical implications for market participants.
PurposeWe examined the dynamic volatility connectedness and diversification strategies among US real estate investment trusts (REITs) and green finance indices.Design/methodology/approachThe DCC-GARCH dynamic connectedness framework and he DCC-GARCH t-copula model were employed in this study.FindingsUsing daily data from 2,206 observations spanning from 2 January 2015 to 31 January 2023 this paper presents the following findings: (1) cross-market spillovers exhibited a high correlation and significant fluctuations, particularly during extreme events; (2) our analysis confirmed that REIT acted as net receivers from other green indices, with the S&P North America Large-MidCap Carbon Efficient Index dominating the in-network volatility spillover; (3) this observation suggests asymmetric spillovers between the two markets and (4) a portfolio analysis was conducted using the DCC-GARCH t-copula framework to estimate hedging ratios and portfolio weights for these indices. When REIT and the Dow Jones US Select ESG REIT Index were simultaneously added to a risk-hedged portfolio, our findings indicated that no risk-hedging effect could be achieved. Moreover, the cost and performance of hedging green assets using REIT were found to be comparable.Originality/valueWe first examined the dynamic volatility connectedness and diversification strategies among US REITs and green finance indices. The outcomes of this study carry practical implications for market participants.
The consumption-based capital asset pricing model (CCAPM) is an attractive research field in finance, and extant studies have examined the impacts of different factors towards traditional CCAPM, intending to improve the model from the practical perspective. In this paper, we comprehensively scrutinize the real economy effects on the CCAPM by comprising expenditure on durable, expenditure on non-durable goods, services, and real estate four factors. Our study pays great attention to the real economy effect on the CCAPM based on two types of portfolios. By employing both time-series and cross-sectional analysis, our empirical results suggest that the real economy factors can help traditional CCAPM to produce better asset pricing results. Particularly, incorporating the real estate component into the CCAPM model can improve its explanation power on the stock market risk. Our results are potentially useful for investors, portfolios managers and policy makers towards the CCAPM.
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