International Journal of Business and Economics Volume 23, No. 2 September, 2024

Asymmetric Jump Beta and Continuous Beta in Taiwan REIT Market

Tsung-Li Chi

Department of Finance, I-Shou University

Sheng-Jung Li

Department of Finance, Shu-Te University

Abstract

This paper utilizes recent advances in econometric theory, developed by Anderson, Bollerslev, and Diebold (2007), Barndorff-Nielsen and Shephard (2004), and Tauchen and Zhou (2006), to effectively separate the continuous and jump components of all REITs and stock indexes in Taiwan. We find that jump contributes approximately 62.4 percent of total variance for all REITs in Taiwan. In addition, we further decompose each of the volatility components into continuous systematic risk and jump systematic risk by extending CAPM and three-factor models. The empirical results show that the jump beta is significantly higher than the continuous beta for all REITs in Taiwan. This implies that the jump beta is the most relevant measure of co-movement with the market on days when the market experiences a jump. Furthermore, the R-squared of the modified model improves in REITs, compared with the traditional CAPM and three-factor model, implying the necessary of separating the continuous and jump components. Next, the continuous (jump) betas of most of REITs do not have significantly asymmetric effect (leverage effect). Forth, we find that the most jump risk is nonsystematic. This suggests that accounting for jump risk is most important in a non-diversified context where nonsystematic risk is present.

Keywords：Asset Price Volatility, REITs, Asymmetric Continuous Beta, Asymmetric Jump Beta

JEL Classifications：G10, B40

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