Abstract
Real estate investment trusts have had a difficult time penetrating the European real estate market while non-real estate investment trusts were a widely accepted investment vehicle in all EU member states. This study aims to examine the lack of popularity of real estate investment trust in the European market through the lens of European property research association index performance, comparing real estate investment trust with non-investment trusts head to head in terms of return, co-movement, liquidity and volatility modelling using the GJR-GARCH model. The results showed that, that European real estate investment trusts indexes were not a good diversification strategy. They exhibited high volatility, did not return to the previous stock index level, gave a poorer return to their competitive counterpart, had a higher shock persistency and strong correlation with the stock market index. Although some advantages of real estate investment trusts were identified, such as higher liquidity and stronger resilience to bad news asymmetry, overall, the European real estate market was very fragile. Possible study nuances could be attributed to the fact that investment trusts in the European market were still very young, and their index initial starting point came right at the peak of the real estate price bubble.
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