Adaptive market hypothesis: evidence from the REIT market

Zhou, Jian; Lee, Jin Man

doi:10.1080/09603107.2013.844326

Cited by 48 publications

(24 citation statements)

References 37 publications

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“…The lagged REIT returns have a material influence on current returns across different quantiles and frequencies. Our results support evidence by Clayton and MacKinnon (2003) and Zhou and Lee (2013), who find that REIT return behavior and predictability are time-varying. Zhou and Lee (2013) further show that market conditions indeed influence return predictability.…”

Section: Resultssupporting

confidence: 91%

“…The evidence of a quantile-specific dependency structure supports the adaptive market hypothesis as suggested by Clayton and MacKinnon (2003); Zhou and Lee (2013); and Liu et al (2019) while partly contradicting past evidence of the efficiency of the REITs markets. The results of the study should be valuable to market participants in the REITs markets, whose successful investment decisions depend on their ability to model and forecast REITs price movements.…”

Section: Discussionmentioning

confidence: 41%

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Overreaction in the REITs Market: New Evidence from Quantile Autoregression Approach

Ngene

Manohar

Julio

2020

JRFM

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Real estate investment trusts (REITs) provide portfolio diversification and tax benefits, a stable stream of income, and inflation hedging to investors. This study employs a quantile autoregression model to investigate the dependence structures of REITs’ returns across quantiles and return frequencies. This approach permits investigation of the marginal and aggregate effects of the sign and size of returns, business cycles, volatility, and REIT eras on the dependence structure of daily, weekly, and monthly REIT returns. The study documents asymmetric and misaligned dependence patterns. A bad market state is characterized by either positive or weakly negative dependence, while a good market state is generally marked by negative dependence on past returns. The results are consistent with under-reaction to good news in a bad state and overreaction to bad news in a good state. Past negative returns increase and decrease the predictability of REIT returns at lower and upper quantiles, respectively. Extreme positive returns in the lower (upper) quantiles dampen (amplify) autocorrelation of daily, weekly, and monthly REIT returns. The previous day’s REIT returns dampen autoregression more during recession periods than during non-recession periods. The marginal impact of the high volatility of daily returns supports a positive feedback trading strategy. The marginal impact of the Vintage REIT era on monthly return autocorrelation is higher than the New REIT era, suggesting that increased participation of retail and institutional investors improves market efficiency by reducing REITs’ returns predictability. Overall, the evidence supports the time-varying efficiency of the REITs markets and adaptive market hypothesis. The predictability of REIT returns is driven by the state of the market, sign, size, volatility, and frequency of returns. The results have implications for trading strategies, policies for the real estate securitization process, and investment decisions.

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Section: Resultssupporting

confidence: 91%

Section: Discussionmentioning

confidence: 41%

Overreaction in the REITs Market: New Evidence from Quantile Autoregression Approach

Ngene

Manohar

Julio

2020

JRFM

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“…In addition, the application of VR and portmanteau test by Zhou and Lee [158] revealed declining predictability over time. The dummy OLS regression further showed that the US real estate market efficiency is influenced by market development, inflation, volatility and regulatory changes from 1980 to 2009.…”

Section: Return Predictability and Market Condition Studiesmentioning

confidence: 99%

Are African Stock Markets Inefficient or Adaptive? Empirical Literature

Obalade¹,

Muzindutsi²

2021

Emerging Markets

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This chapter reviews empirical studies on weak form of efficiency with the aim of establishing whether the African market is inefficient or adaptive. The reviewed studies are categorised based on their methodological approaches to compare the power of linear and non-linear models in testing for weak-form efficiency. The studies on calendar anomalies, an indication of weak-form inefficiency, are reviewed to assess whether these anomalies are adaptive as portrayed by the relatively recent theory of adaptive market hypothesis (AMH). The scope of reviewed studies is also extended to developed and emerging markets to gain a broad comparison of the findings. This review revealed that non-linear dependence has been revealed in stock returns suggesting that non-linear models are best fit to test for the stock market efficiency. Reviewed studies produced contradictory findings with some supporting and others rejecting weak-form efficiency. Thus, most studies support the AMH, which suggests that market efficiencies and anomalies are time changing. This chapter concludes that most of the existing studies on AMH have been carried out in markets other than Africa, and hence, further empirical studies on the evolving and changing nature of efficiency in African stock markets are recommended.

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“…Studies on AMH do not only focus on stock markets but also foreign exchange markets (Neely, Weller and Ulrich, 2009;Charles, Darne and Kim, 2012) commodity markets (Ghazani and Ebrahimi, 2019) Real Estate Investment Trusts (REIT) (Zhou and Lee, 2013) and Crypto currencies (Khuntia and Pattanayak, 2018). However, since the Turkish stock market is discussed in this study, only the studies dealing with stock markets are examined in the literature and presented in a table.…”

Section: Literature Reviewmentioning

confidence: 99%

Adaptive Market Hypothesis

Pinar¹,

Zeliha²

2019

IJEBA

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Purpose: To investigate the implications of the Addaptive Market Hypothesis (AMH) on Turkish stock exchange market (Borsa Istanbul) indices as an emerging economy. BIST-100, BIST-30 and BIST-All indices are subjected to the analyses for the period between January 2002 and April 2017. Design/Methodology/Approach: Two-year rolling windows and daily test values were calculated by using linear methods (Variance Ratio Test) and nonlinear methods (BDS test) to investigate the market efficiency. Findings: According to the Variance Ratio Test results, index returns are unpredictable, that is, the market is efficient, while the results of nonlinear analysis show the existence of adaptive market hypothesis. In particular, all three indices display efficiency in the 2013-2016 period implying that returns were not predictable in this period. The results of the non-linear analysis show that the market is efficient from time to time and sometimes deviates from efficiency, indicating the validity of the adaptive market hypothesis in Borsa Istanbul. Practical Implications: The changes in the market efficiency from time to time should be considered while taking important investment decisions. Moreover, according to AMH, since trends, panics, bubbles and crashes exist in the market, arbitrage opportunities arise time to time, and market timing is an important issue to catch the profit opportunities. Therefore, as a further study, matching the important events with the efficiency of the market could provide more insights about timing the market. Originality/Value: To the best of authors' knowledge, this is the first comprehensive study that examines the index based AMH in Borsa Istanbul. This study is believed to contribute to the literature by giving insights about the evolution of market efficiency in Turkey.

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Adaptive market hypothesis: evidence from the REIT market

Cited by 48 publications

References 37 publications

Overreaction in the REITs Market: New Evidence from Quantile Autoregression Approach

Overreaction in the REITs Market: New Evidence from Quantile Autoregression Approach

Are African Stock Markets Inefficient or Adaptive? Empirical Literature

Adaptive Market Hypothesis

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