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The convergent behavior in REIT markets

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  • I‐Chun Tsai
  • Cheng‐Feng Lee

Abstract

Purpose - The purpose of this paper is to analyze whether a convergent behavior exists in the price indexes of the seven Asian Real Estate Investment Trust (REIT) markets. Design/methodology/approach - The authors investigate the convergent behavior in Asian REIT indexes against Japan and the USA by conducting the unit‐root testing procedure. Findings - Results show that the Asian REIT markets are more connected with the US REIT market than with that of Japan. The convergent behavior was more obvious since 2007. Practical implications - The underlying assets of real estate securities in different countries are usually not directly related; hence, there should be segmentation to a certain extent between international REIT markets as well. If the performances of Asian REIT markets are converged, this linkage can be viewed as a contagion effect. Originality/value - The results of this paper indicate that the risk of REITs might be underestimated and the benefit that investors may acquire from adding REITs to their portfolios might be overestimated.

Suggested Citation

  • I‐Chun Tsai & Cheng‐Feng Lee, 2012. "The convergent behavior in REIT markets," Journal of Property Investment & Finance, Emerald Group Publishing Limited, vol. 30(1), pages 42-57, February.
    • Handle: RePEc:eme:jpifpp:v:30:y:2012:i:1:p:42-57
    DOI: 10.1108/14635781211194791
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