Uncertainty due to infectious diseases and forecastability of the realized variance of United States real estate investment trusts: A note

• Published date: 01 September 2022
• Author: Matteo Bonato,Oğuzhan Çepni,Rangan Gupta,Christian Pierdzioch
• Date: 01 September 2022
• DOI: http://doi.org/10.1111/irfi.12357

SHORT REPORT

Uncertainty due to infectious diseases and

forecastability of the realized variance of United

States real estate investment trusts: A note

Matteo Bonato

1,2

|O



guzhan Çepni

3,4

| Rangan Gupta

5

|

Christian Pierdzioch

6

1

Department of Economics and Econometrics,

University of Johannesburg, Auckland Park,

South Africa

2

IPAG Business School, Paris, France

3

Department of Economics, Copenhagen

Business School, Frederiksberg, Denmark

4

Central Bank of the Republic of Turkey, Haci

Bayram Mah, Ankara, Turkey

5

Department of Economics, University of

Pretoria, Pretoria, South Africa

6

Department of Economics, Helmut Schmidt

University, Hamburg, Germany

Correspondence

Christian Pierdzioch, Department of

Economics, Helmut Schmidt University,

Hamburg, Germany.

Email: macroeconomics@hsu-hh.de

Abstract

We examine the forecasting power of a daily newspaper-

based index of uncertainty associated with infectious

diseases (EMVID) for real estate investment trusts (REITs)

realized market variance of the United States (US) via the

heterogeneous autoregressive realized volatility (HAR-RV)

model. Our results show that the EMVID index improves

the forecast accuracy of realized variance of REITs at short-

, medium-, and long-run horizons in a statistically significant

manner, with the result being robust to the inclusion of

additional controls (leverage, realized jumps, skewness, and

kurtosis) capturing extreme market movements, and also

carries over to 10 sub-sectors of the US REITs market. Our

results have important portfolio implications for investors

during the current period of unprecedented levels of

uncertainty resulting from the outbreak of COVID-19.

KEYWORDS

forecasting, infectious diseases, realized variance, REITs,

uncertainty

JEL CLASSIFICATION

C22; C53; G10

Received: 6 November 2020 Revised: 27 March 2021 Accepted: 21 June 2021

DOI: 10.1111/irfi.12357

This is an open access article under the terms of the Creative Commons Attribution-NonCommercial-NoDerivs License, which

permits use and distribution in any medium, provided the original work is properly cited, the use is non-commercial and no

modifications or adaptations are made.

© 2021 The Authors. International Review of Finance published by John Wiley & Sons Australia, Ltd on behalf of International Review

of Finance Ltd.

540 International Review of Finance. 2022;22:540–550.

wileyonlinelibrary.com/journal/irfi