Real estate is commonly viewed as a good diversification tool since the real estate market cycle exhibit low correlations to other asset classes. Moreover, Real Estate Investment Trusts (REITs) have become increasingly popular in the past decades since this investment form offers private investors a convenient way of diversifying stock portfolios with real estate. Some studies investigating the within-country diversification potential of REITs and stocks have been performed. These studies generally suggest poor diversification potential. Hence, we investigate the international diversification potential of REITs from Europe, Asia Pacific and the US for private investors holding European stocks from 2007 to 2019. For Europe and Asia Pacific, REIT markets with different maturity levels are included since emerging and developed REIT markets might have different characteristics affecting the diversification potential. We also examine which market leads which in terms of changes in returns. Moreover, the diversification potential of REITs may depend on the investment horizon, hence the long- and short-run perspectives for private investors are examined. The lesson learned from the Global Financial Crises and European Debt Crisis is that abnormal market conditions may change the behavior of assets on the financial markets, and significantly affect portfolio behavior. Hence, diversification potential in relation to crises is also considered. The methods employed are Johansen’s cointegration, Granger non-causality and DCC-GARCH. Our findings suggest long- and short-run diversification potential of international REITs for European stocks. Cross-regional combinations of REITs and stocks generally offer better diversification potential than within-regional combinations, and emerging REIT markets are preferred over their developed counterparts due to lower conditional correlations. Moreover, changes in stock market returns lead changes in REIT market returns, indicating that stock markets react more quickly to new information on the market. Long- and short-run diversification potential still exists during the crises although increased conditional correlations suggest higher interdependence in this period. However, there is no trend of increasing conditional correlations over the whole sample, suggesting the abnormal market conditions during the financial turmoil did not permanently change the diversification potential of REITs in stock portfolios.

In this study we analyse the relationship between renewable energy, electricity prices, and the stock market. The impact from electricity prices on stock markets have previously been thoroughly analysed. However, our study evaluates if a country’s share of renewable energy in their electricity production impacts the strength and size of the relationship in question. We use data from eight countries of rather equal economical sizes but that uses very opposed energy sources. Sweden, Norway, Finland, and Latvia represent countries with high amounts of renewable energy. While Belgium, Netherlands, Poland, and Hungary constitute countries with low shares of renewable energy. By using daily data between January 2016 and December 2021, we aim to understand the relationship of electricity prices and stock market indices and the role of renewable energy in this relationship. We do this by using Johansen’s cointegration test as well as analysing the correlation between volatilities through a DCC-GARCH(1,1). We find that both tests indicate a negative correlation between the electricity and stock markets as well as for their volatilities. In addition, we find some disparities between countries depending on their share of renewable energy. The impact of electricity prices on the stock market tends to be more pronounced for countries that use larger shares of renewable energy. Finally, findings suggest that the energy source used for electricity production also constitute an important factor in the connectivity of the markets. Wind power was found to be the main cause to the larger fluctuations on the electricity market leading to stronger relationship to the stock market. While hydro power is the more stable option of renewable energy with smaller variances and large storage capacity, weakening the link between the electricity market and stock market.