Diversification Power of Real Estate Market Securities: The Role of Financial Crisis and Dividend Policy

Metin Ilbasmis, Marc Gronwald, Yuan Yuan Zhao

Research output: Working paperDiscussion paper

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This paper investigates dynamic conditional correlations between stock and REIT markets in both Turkey and the U.S. We use an Asymmetric DCC - GJR - GARCH model to estimate the dynamic conditional correlation at daily, weekly, and monthly frequencies. Our contribution is threefold. First, we find a that downward trend in the daily conditional correlation in the Turkish market, which is contrary to the literature, while the upward trend in the correlation of the two U.S. markets is consistent with the literature. Second, we observe that the trend in the correlation changes the direction with the 2008 Global Financial Crisis. The negative trend in Turkish market becomes positive and the positive trend in the U.S. market becomes negative after the crisis, which could indicate a structural break in the REIT market caused by the crisis. Third, we find that the dividend policy of REITs plays an important role on the dynamics of the correlation. Dividend payments by Turkish REITs decrease their conditional correlation with the Turkish stock market while no such relationship is detected in the U.S. We argue that both the relationship between dividend payments by REITs and REIT correlation with the stock index is associated with the different regulatory environment of REITs in Turkey.
Original languageEnglish
PublisherUniversity of Aberdeen: Business School
Number of pages46
Publication statusPublished - 5 May 2018

Publication series

NameDiscussion Paper in Economics
PublisherUniversity of Aberdeen
ISSN (Electronic)0143-4543


  • REITs
  • Equity
  • Correlations
  • Deterministic Trend
  • Dividend Policy


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