Abstract
This research studies momentum returns in REITs by investigating the cross-sectional relationship between different types of volatilities and asset returns of REITs. We examine asymmetric risk effect in momentum returns with a GARCH-in-mean model and examine the effects of idiosyncratic volatility and aggregate market volatility on asset returns. There are four key findings. First, momentum returns display asymmetric volatility. Momentum returns in REITs are higher when volatility is higher. Second, REITs with lowest past returns (losers) have higher idiosyncratic risks than those with highest past returns (winners). The difference between losers' and winners' idiosyncratic risks is significant and can partially explain momentum returns. Third, investors require a lower risk premium for holding losers' idiosyncratic risks, but require a higher risk premium for holding winner's idiosyncratic risks. Four, there is a positive relation between asset returns and aggregate market volatility, with the magnitude of the relationship is larger for losers than for winners.
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