Co-Skewness and Co-Kurtosis in Global Real Estate Securities

Journal of Property Research, Vol. 22, No. 2 & 3, pp. 163-203, June 2005

Posted: 23 Jan 2011 Last revised: 25 Jan 2011

See all articles by Lanz Chan

Lanz Chan

Finamatrix Pte. Ltd.; Beijing Institute of Technology - Zhuhai Campus

Date Written: January 21, 2011

Abstract

We explore the question of whether co-skewness and co-kurtosis risk measures can be added to supplement to the covariance risk in pricing global real estate securities and risk premium estimation. Based on a generalized four-moment CAPM with two alternative world market proxies, we examine Linear, Quadratic and Cubic Market Models using GMM and time-varying Kalman-Filter methodologies. Our results show that the second moment is important in explaining real estate securities returns. Furthermore, some real estate securities also display significant time-varying co-skewness and/or co-kurtosis. Co-kurtosis is more important than co-skewness in pricing global real estate securities. We further find that the co-skewness and co-kurtosis coefficients and the resulting risk premia are sensitive to the market proxy used. The findings of this study provide additional insights into the risk-return characteristics, pricing and portfolio design in global real estate securities.

Keywords: Higher-moment CAPM, co-skewness, co-kurtosis, time-varying, risk premia

Suggested Citation

Chan, Lanz, Co-Skewness and Co-Kurtosis in Global Real Estate Securities (January 21, 2011). Journal of Property Research, Vol. 22, No. 2 & 3, pp. 163-203, June 2005, Available at SSRN: https://ssrn.com/abstract=1010948

Lanz Chan (Contact Author)

Finamatrix Pte. Ltd. ( email )

Singapore

HOME PAGE: http://www.finamatrix.com

Beijing Institute of Technology - Zhuhai Campus ( email )

Tangjia Bay
Zhuhai, Guangdong
China

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