Time-varying beta risk of Turkish Real Estate Investment Trusts

Gözde Altınsoy, Işıl Erol, S. Kasırga Yıldırak


This paper provides empirical evidence on the time varying behavior of beta for the publicly traded real estate companies (REITs) in Turkey using the last seven years of both weekly and daily data. In our sample period, Turkey’s GDP growth rate has experienced a trend break. After the long lasting financial crisis of 2001, real GDP growth rate has increased gradually from 2002 to 2005, but it has subsequently decreased sharply until June 2009. We use the Diagonal BEKK covariance specification of the M-GARCH model (Engle and Kroner, 1995), the Schwert and Seguin (1990) model and the Kalman Filter algorithm with random walk parameterization in an attempt to evaluate time-varying behavior of REIT industry beta. We find that similar to the other emerging and developed REIT markets Turkish REITs have a declining beta over the sample period. In order to investigate if REIT betas exhibit a diverse behavior under high and low economic growth periods, we determine two sub-periods and examine the change in average beta values in line with the GDP growth rate. Our empirical results suggest that REIT returns more closely track stock market in high-growth economic states. Hence, this article provides no evidence on the asymmetric time-varying behavior of REIT betas.


Time-varying betas, systematic risk, Real Estate Investment Trusts (REITs), Turkish Real Estate Returns, Diagonal BEKK M-GARCH Model, Kalman filter

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