Abstract
Orientation: Hedging against price risk is central to asset management, especially during
instability. The rise of real-estate investment trusts (REITs) has increased the use of propertyrelated
portfolios.
Research purpose: This study tests whether systemic risk spillovers occur in REIT markets
across major emerging countries and whether these linkages strengthen under stress.
Motivation for the study: Although REITs matter in emerging-market portfolios, limited
evidence shows how domestic systemic risk affects REIT volatility in normal and extreme
conditions. This limits guidance on when REITs diversify portfolios and when hedging
effectiveness weakens.
Research approach/design and method: The study uses three econometric models: DCCGARCH
to capture volatility co-movements, Diebold–Yilmaz FEVD to measure volatility
transmission and an Asymmetric GARCH-Copula to assess tail dependence during extreme
episodes.
Main findings: In normal periods, volatility transmission from systemic risk proxies to REIT
volatility is low, with FEVD shares ranging from 0.01% to 2.48% for China and Brazil. The
strongest channels are South Africa’s yield share (10.16%) and India’s volatility-index share
(12.51%). Under stress, dependence rises markedly: tail dependence reaches 0.580–0.619 for
South Africa and 0.421 for India, showing that diversification benefits weaken when systemic
risk is elevated.
Practical/managerial implications: REIT hedging performance is market- and regimedependent.
Asset managers should apply conditional hedging and stress testing, with greater
vigilance in South Africa and India.
Contribution/value-add: The study shows that normal-period spillover estimates can
understate crisis-period dependence and provides a multi-model benchmark for monitoring
REIT hedging effectiveness under systemic stress.