Financial Interdependencies: Analyzing the Volatility Linkages between Real Estate Investment Trusts, Sukuk, and Oil in GCC Countries

Round 1

Reviewer 1 Report

Comments and Suggestions for Authors

Dear Author,

Your manuscript presents a significant contribution to the field, particularly with the application of the Time-Varying Parameter Vector Autoregressive (TVP-VAR) model. However, after a careful review, I have identified several areas where the manuscript could be strengthened. I believe that addressing the following points will enhance the robustness and overall quality of your paper.

1. Literature Review Enhancement:

While your literature review covers key aspects of the subject, it lacks a thorough discussion of the methodological advancements that support your research approach. I suggest you expand the literature review to include a comparative analysis of the TVP-VAR model relative to other advanced volatility models, such as GARCH variations (DCC-GARCH, CCC-GARCH etc.), and wavelet-based methods. Specifically, discussing the advantages of TVP-VAR in capturing time-varying dynamics, as compared to the partial wavelet coherence approach which isolates specific impacts like oil prices on the GCC real estate market, will better justify your methodological choice.

2. The manuscript would benefit from a more detailed examination of the external factors that could influence the results of your study. A discussion on relevant macroeconomic variables (e.g., interest rates, exchange rates) or sector-specific drivers (e.g., regulatory changes, market liquidity) may affect the outcomes of your analysis. This will not only provide context to your findings but also offer a more comprehensive understanding of the factors influencing the dynamics you are studying.

3. Your paper briefly touches on the concept of market efficiency but lacks a detailed discussion on how your findings relate to this important concept, particularly in terms of the implications for investors seeking diversification benefits.

Author Response

Response to Reviewer 1 Comments

Point 1: While your literature review covers key aspects of the subject, it lacks a thorough discussion of the methodological advancements that support your research approach. I suggest you expand the literature review to include a comparative analysis of the TVP-VAR model relative to other advanced volatility models, such as GARCH variations (DCC-GARCH, CCC-GARCH etc.), and wavelet-based methods. Specifically, discussing the advantages of TVP-VAR in capturing time-varying dynamics, as compared to the partial wavelet coherence approach which isolates specific impacts like oil prices on the GCC real estate market, will better justify your methodological choice.

Response 1: Incooperated—see the methodology section (yellow highlighted). Instead of reviewing the comparison among the methods (such as DCC-GARCH, Wavelet, etc.), I elaborated on the advantages of TVP-VAR. In other words, it implies a suitable method used for the study.

 

Point 2: The manuscript would benefit from a more detailed examination of the external factors that could influence the results of your study. A discussion on relevant macroeconomic variables (e.g., interest rates, exchange rates) or sector-specific drivers (e.g., regulatory changes, market liquidity) may affect the outcomes of your analysis. This will not only provide context to your findings but also offer a more comprehensive understanding of the factors influencing the dynamics you are studying.

Response 2: We do not include other relevant macroeconomic variables, such as interest rates and exchange rates, because the GCC countries adopt pegged exchange rate regimes and the Islamic system, which results in low volatility in exchange rates and interest rates.

 

Point 3: Your paper briefly touches on the concept of market efficiency but lacks a detailed discussion on how your findings relate to this important concept, particularly in terms of the implications for investors seeking diversification benefits.

Response 3: We already elaborated on the implications for investors seeking diversification in the “Hedge Ratio” section.

Reviewer 2 Report

Comments and Suggestions for Authors

The paper presents an insightful analysis of financial interlinkages between REITs, sukuk, and oil in GCC nations by employing a TVP-VAR model to investigate volatility spillovers. This methodology is well-suited to capture dynamic relationships and provides valuable implications for risk management and financial stability among investors and policymakers.

Some enhancements could further strengthen the study.

Firstly, justifying the selection of 2014-2024 as the sample period would aid context. Daily data facilitates examining volatility dynamics as conducted, although more context on preprocessing steps taken would support rigor.

Additionally, the TVP-VAR model is a strong choice for examining time-varying relationships, but providing more methodological details around model specification, such as parameter choices and robustness checks, could enhance credibility.

Explicitly addressing limitations in the scope of analysis, like potential data biases and generalizability of insights to other markets, would also help better understand the research. Finally, outlining opportunities for future work will make further contributions.

Comments on the Quality of English Language

The authors use appropriate academic language and terminology throughout the paper, demonstrating a good command of the subject matter. The sentences are generally well-formed, and the ideas are expressed clearly. While the overall language quality is good, a moderate English editing could help enhance clarity and readability of this paper.

Author Response

Response to Reviewer 2 Comments

Point 1: Firstly, justifying the selection of 2014-2024 as the sample period would aid context. Daily data facilitates examining volatility dynamics as conducted, although more context on preprocessing steps taken would support rigor.

Response 1: Incooperated—see the data and methodology section (green highlighted).

 

Point 2: Additionally, the TVP-VAR model is a strong choice for examining time-varying relationships, but providing more methodological details around model specification, such as parameter choices and robustness checks, could enhance credibility.

Response 2: We used TVP-VAR suggested by Antonakakis et. al. (2020). The authors improve the existing method in four ways: (i) the model can more accurately determine potential changes in the parameters' values; (ii) outliers do not affect outcomes; (iii) the model do not need to set an arbitrary rolling-window size; and (iv) the model do not lose any observations during the calculation of the dynamic measures. The application of Monte Carlo simulations clearly demonstrates the first two benefits. The model actually tested how stable the estimates are by looking at how sensitive they are to outliers and how well they work when the parameters' values change.

 Point 3: Explicitly addressing limitations in the scope of analysis, like potential data biases and generalizability of insights to other markets, would also help better understand the research. Finally, outlining opportunities for future work will make further contributions.

Response 3: Incooperated – see the last paragraph in Conclusion (green highlighted)

Point 4: The authors use appropriate academic language and terminology throughout the paper, demonstrating a good command of the subject matter. The sentences are generally well-formed, and the ideas are expressed clearly. While the overall language quality is good, a moderate English editing could help enhance clarity and readability of this paper.

Response 4: Done – we proof read the paper

Reviewer 3 Report

Comments and Suggestions for Authors

1. Proof Reading is highly recommended before submitting.

2. The citations are messy. For example,  in line 33, Zhao, Chen 33 and Zhang, (2024); Rehman et al., (2024);(Danila, 2023a, 2023b).
3. The motivation is not obvious. "However, they need to look into the interdependencies among sukuk, oil, and Real 35 Estate Investment Trusts (REITs). In order to address this gap..." Why do they need to ?

4. This study employs the time-varying parameter vector autoregression (TVP-VAR) model to comprehend the dynamic volatility spillover without describing and comcomparing the strength of TVP-VAR. The litliterature tends to use DCC, BEKK, and other multivariate garch models. The topic is old.

5. This study does not describe equtions in detail. For example, in equation (1), it does not mention the  phi functions nor m.

6. Figur1 seems to be redundant as the arrow is unclear and its description is just a line. Other figures suffer from the same problem.

7. Tiltes of figures should be below the figures.

Comments on the Quality of English Language

common

Author Response

Response to Reviewer 3 Comments

Point 1: Proof Reading is highly recommended before submitting

Response 1: Done – we proof read the paper

 

Point 2: The citations are messy. For example,  in line 33, Zhao, Chen 33 and Zhang, (2024); Rehman et al., (2024);(Danila, 2023a, 2023b).

Response 2: I don’t really understand with this comment. However, the citations are according to APA styles  

 

Point 3: The motivation is not obvious. "However, they need to look into the interdependencies among sukuk, oil, and Real 35 Estate Investment Trusts (REITs). In order to address this gap..." Why do they need to ?.

Response 3: the reasons are elaborated in the whole paragraph.

Point 4: This study employs the time-varying parameter vector autoregression (TVP-VAR) model to comprehend the dynamic volatility spillover without describing and comparing the strength of TVP-VAR. The literature tends to use DCC, BEKK, and other multivariate garch models. The topic is old.

Response 4: I don’t agree with the comment. There are so many research papers using TVP-VAR until recently, for example:

• Jionghao Huang, Baifan Chen, Yushi Xu, Xiaohua Xia, Time-frequency volatility transmission among energy commodities and financial markets during the COVID-19 pandemic: A Novel TVP-VAR frequency connectedness approach, Finance Research Letters, Volume 53, 2023.
• Mroua, M. and Bouattour, H. (2023), "Connectedness among various financial markets classes under Covid-19 pandemic and 2022 Russo-Ukrainian war: evidence from TVP-VAR approach", Journal of Financial Economic Policy, Vol. 15 No. 2, pp. 140-163.

 

Point 5: This study does not describe equtions in detail. For example, in equation (1), it does not mention the phi functions nor m.

Response 5: the paper is not developing model paper, but empirical research, it means we just use the existing model to analyse the data. Details of equations are not really needed. We already elaborate the function of each formula, which is enough for the empirical research.

 

Point 6: Figure 1 seems to be redundant as the arrow is unclear and its description is just a line. Other figures suffer from the same problem

Response 6: the figures are not redundant. Each figure has its own objective. Regarding the arrow, it is given by the software package.

Point 7: Titles of figures should be below the figures

Response 7: Incooperated – see the description of all figures.