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Have Equity REITs Experienced Periodically Collapsing Bubbles?

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  • James Payne

    ()

  • George Waters

    ()

Abstract

This paper uses the momentum threshold autoregressive (MTAR) model and the residuals-augmented Dickey–Fuller (RADF) test to examine the possibility of Evans’ (1991) periodically collapsing bubbles in the equity REIT market. The results are mixed. The MTAR model indicates that overall real equity REIT prices and dividends are cointegrated with asymmetric adjustment towards the long-run equilibrium. However, the estimated coefficients of the MTAR model do not indicate the presence of periodically collapsing bubbles. Adjustment in the standard cointegration tests of bubbles for skewness and excess kurtosis via the RADF test fails to reject the null hypothesis of no cointegration, leaving the possibility of periodically collapsing bubbles. The MTAR and RADF results with respect to equity REIT sub-sectors are mixed. Lodging is the only sub-sector in which both the MTAR and RADF results support periodically collapsing bubbles. Moreover, market fundamentals proxied by two alternative measures of capacity utilization do not explain either real equity REIT prices or dividends. Copyright Springer Science+Business Media, LLC 2007

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Bibliographic Info

Article provided by Springer in its journal The Journal of Real Estate Finance and Economics.

Volume (Year): 34 (2007)
Issue (Month): 2 (February)
Pages: 207-224

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Handle: RePEc:kap:jrefec:v:34:y:2007:i:2:p:207-224

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Web page: http://www.springerlink.com/link.asp?id=102945

Related research

Keywords: REIT; Equity; Dividends; Periodically collapsing bubbles;

References

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Cited by:
  1. Pierdzioch, Christian & Rülke, Jan Christoph & Stadtmann, Georg, 2012. "Housing starts in Canada, Japan, and the United States: Do forecasters herd?," Discussion Papers 320, European University Viadrina Frankfurt (Oder), Department of Business Administration and Economics.
  2. Maximilian Brauers & Matthias Thomas & Joachim Zietz, 2014. "Are There Rational Bubbles in REITs? New Evidence from a Complex Systems Approach," The Journal of Real Estate Finance and Economics, Springer, vol. 49(2), pages 165-184, August.
  3. Cuñado, J. & Gil-Alana, L.A. & Perez de Gracia, F., 2012. "Testing for persistent deviations of stock prices to dividends in the Nasdaq index," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 391(20), pages 4675-4685.
  4. Waters, George A., 2008. "Unit root testing for bubbles: A resurrection?," Economics Letters, Elsevier, vol. 101(3), pages 279-281, December.

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