Wu et al. Are REITs defensive? Evidence from the U.S.. Afr. J. Bus. Manage.



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Afr. J. Bus. Manage.

Vol. 4 No. 7

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Full Length Research Paper

Are REITs defensive? Evidence from the U.S.

Ming-Che Wu¹, Yung-Shi Liau^2* and Yung-Chang Wang³

¹Overseas Chinese University, 100 Chiao Kwang Road, Taichung 407, Taiwan.

²Nanhua University, 55, Sec. 1, Nanhua Road, Dalin, Chiayi 62248, Taiwan.

³Chinese Culture University, 55 Hua Kang Road, Yang Ming Shan, Taipei 11114, Taiwan.

*Corresponding author. E-mail: ysliau@mail.nhu.edu.tw. Tel: 886-5-2721001.

Ext: 56232. Fax: 886-5-2427172.

Accepted 26 May, 2010

Abstract

Real estate investment trusts (REITs) are regarded as defensive assets with low risk and returns in the real world. The dynamic conditional correlations bivariate threshold GARCH (DCC-TGARCH) model is employed to test for the defensive property of REITs. The data are collected at daily intervals covering the time period from January 3, 2005 to December 31, 2009. Evidence indicates that, the betas work asymmetrically in the up and down markets as well as that the systematic risk of REITs is lower in the down market. In other words, the four types of REITs act as defensive stocks in the time period under discussion in the sense that REITs have lower downside betas when the market declines.

Key words: REITs, defensive, DCC-TGARCH, beta.

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