Low Volatility Investing in U.S. Equity REITs

International Real Estate Review, Forthcoming

Posted: 24 Dec 2015

See all articles by Jon Spinney

Jon Spinney

Vestcor Investment Management

Greg H. MacKinnon

Saint Mary's University, Canada - Department of Finance, Information Systems & Management Science

Date Written: August 6, 2015

Abstract

We examine the market for U.S. equity real estate investment trusts (REITs) for evidence of the volatility effect, in which low volatility stocks tend to outperform high volatility ones, as has been found in the general equity market by prior research. While there is some evidence of a volatility effect in the first ten years of the sample, this disappears in a more recent time period. Furthermore, we test the efficacy of low risk portfolio construction techniques and find that none perform any better than a market cap weighted portfolio – although they are also no worse – over any of the time periods examined. Thus, there is no evidence that using a risk-based portfolio design that emphasizes low volatility would improve portfolio performance for a REIT allocation.

Keywords: REITs, low volatility anomaly, portfolio construction

JEL Classification: G12, G14

Suggested Citation

Spinney, Jonathan and MacKinnon, Greg H., Low Volatility Investing in U.S. Equity REITs (August 6, 2015). International Real Estate Review, Forthcoming, Available at SSRN: https://ssrn.com/abstract=2706074

Jonathan Spinney

Vestcor Investment Management ( email )

440 King Street
York Tower #581
Fredericton, New Brunswick E3B 5H8
Canada
(506) 444-3692 (Phone)

Greg H. MacKinnon (Contact Author)

Saint Mary's University, Canada - Department of Finance, Information Systems & Management Science ( email )

Halifax, Nova Scotia B3H 3C3 B3H 3C3
Canada
902-420-5730 (Phone)
902-496-8101 (Fax)

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