Are There Rational Speculative Bubbles in REITs?

Jirasakuldech, Benjamas; Campbell, Robert D.; Knight, John R.

doi:10.1007/s11146-006-6010-9

Cited by 44 publications

(35 citation statements)

References 51 publications

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“…Most studies on the public real estate sector exclusively deal with the U.S. market and/or focus on individual securities like Mei and Gao (1995), Seck (1996), Young (1997), Nelling andGyourko (1998), Kuhle and Alvayay (2000), Kleiman et al (2002), as well as Jirasakuldech and Knight (2005). Their conclusions related to the random walk behavior of the U.S. securitized real estate market differ rather frequently.…”

Section: Introductionmentioning

confidence: 99%

Market Efficiency in the Emerging Securitized Real Estate Markets

Schindler

2010

SSRN Journal

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Die Dis cus si on Pape rs die nen einer mög lichst schnel len Ver brei tung von neue ren For schungs arbei ten des ZEW. Die Bei trä ge lie gen in allei ni ger Ver ant wor tung der Auto ren und stel len nicht not wen di ger wei se die Mei nung des ZEW dar.Dis cus si on Papers are inten ded to make results of ZEW research prompt ly avai la ble to other eco no mists in order to encou ra ge dis cus si on and sug gesti ons for revi si ons. The aut hors are sole ly respon si ble for the con tents which do not neces sa ri ly repre sent the opi ni on of the ZEW.Download this ZEW Discussion Paper from our ftp server:ftp://ftp.zew.de/pub/zew-docs/dp/dp10033.pdf Non-technical SummaryEver since the seminal papers of Fama (1965Fama ( , 1970, the analysis of the efficient market hypothesis has been a key topic in both theoretical and empirical capital market analysis. The efficient market hypothesis seeks to answer the question of whether stock prices fully reflect all information available at a specific point in time. Weak-form tests of the efficient market hypothesis focus on the information set of historical prices or return series.Random walk properties of equity prices influence return dynamics, and market efficiency is often considered an essential criterion in assessing the functionality of markets and the asset pricing process, which is of significant relevance for emerging markets in particular. While there is abundant empirical evidence today that developed stock markets are at least weak form efficient and investors are not able to earn excess returns compared to a buy-and-hold strategy by developing and using trading strategies, this finding is more controversial for emerging markets. Thus, the crucial question of the analysis is whether the results from stock markets also hold for securitized real estate markets -in particular against the background that the efficient market hypothesis is rejected for even several developed securitized real Empirical evidence shows that the emerging securitized real estate markets can not be considered less developed, with respect to their market efficiency characteristics, than the markets in countries such as Australia, Japan, the U.K., and the U.S. By contrast, and in contrast to the broad stock markets, the price formation process at emerging markets can not be considered less efficient than that at the four mentioned developed markets from a statistical point of view. The results are confirmed by analyzing excess returns following from technical trading rules.-II - Das Wichtigste in KürzeDie Analyse der Effizienzeigenschaften von Kapitalmärkten ist spätestens seit den grundlegenden Arbeiten von Fama (1965Fama ( , 1970

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Section: Introductionmentioning

confidence: 99%

Market Efficiency in the Emerging Securitized Real Estate Markets

Schindler

2010

SSRN Journal

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“…Junttila (2003) finds evidence of speculative explosive bubbles in the Helsinki Stock Exchange in the 1990s based on a cointegration analysis between stock prices and macro fundamentals. On the contrary, Jirasakuldech et al (2006) find no evidence of rational bubbles in the Russell 2000 index for the period from January 1980 to December 2003. Regarding other asset markets, Wang (2000) finds that rational bubble had not existed in the UK property markets from 1977 to 1997, while Black et al (2006) also cannot find evidence of rational bubbles in UK house prices over the period 1973 through 2004.…”

Section: A U T H O R C O P Ymentioning

confidence: 60%

Rational speculative bubbles in the Asian stock markets: Tests on deterministic explosive bubbles and stochastic explosive root bubbles

Chen¹,

Quan

2013

J Asset Manag

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The standard theory of asset pricing, in which a long-run relationship should exist between stock prices and dividends if there are no deterministic explosive bubbles, assumes the constancy of expected returns. However, the investor'se x p e c t e dr e t u r n sa r e more likely to be time varying, which have led to the modification for the tests of rational bubble. One modification is that the tests should be applied to the log levels of stock price and dividend for allowing the detection of the stochastic explosive root bubble, which incorporates the possibility of time-varying expected returns. Accordingly, we test the existence or otherwise of both types of rational bubbles in the Asian stock markets by applying the unit root tests and the cointegration analyses. The empirical results suggest that the rational bubbles exist in the stock markets of Japan, Singapore, Korea, Taiwan, Thailand, Malaysia, Indonesia and Philippine, whereas Hong Kong is found to have no rational bubbles.

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“…Brooks et al find strong evidence to suggest that there was a bubble in these stocks between 1987 and 1989, as well as from 1996 onwards. Jirasakuldech et al (2006) test for rational speculative bubbles in equity REIT prices using a fairly simple approach involving unit root and co-integration tests. It is important to note that Evans (1991) concludes that cointegration tests are poor at detecting bubbles that burst and regenerate.…”

Section: Introductionmentioning

confidence: 99%

An investigation of bubble spillovers from the stock market and the residential property market to REITs

Nneji¹,

Ward²

2011

Proceedings of the 18th Annual European Real Estate Society Conference - Eindhoven, the Netherlands

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Previous research has focused on the link between returns in the REIT industry, the stock market and the housing market. However, none, so far, have examined the possibility of bubble spillovers from either of the markets to the securitised real estate market. In this paper, we test for the presence of periodically collapsing bubbles in the three markets using a regime switching approach. Significant evidence of this class of bubbles exists in the three markets. Using a Granger causality test, we discover that bubbles spillover from the unsecuritised real estate market to the REIT market, only. Further analyses show that over eight quarters, over 9.5% of the variation in the REIT market bubble is caused by shocks to the housing market bubble compared to the stock market bubble which contributes to only 1.1% of changes. Given these findings, we proceed to compare REIT trading rules that rely on signals from the forecasted probabilities of a crash occurring in the unsecuritised real estate market to other strategies. Between 2000 and 2009, this trading rule outperforms the traditional buy-and-hold strategy.

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Are There Rational Speculative Bubbles in REITs?

Cited by 44 publications

References 51 publications

Market Efficiency in the Emerging Securitized Real Estate Markets

Market Efficiency in the Emerging Securitized Real Estate Markets

Rational speculative bubbles in the Asian stock markets: Tests on deterministic explosive bubbles and stochastic explosive root bubbles

An investigation of bubble spillovers from the stock market and the residential property market to REITs

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