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Nonlinear A Djustment To The Long-Run Equilibrium Between The Reit And The Stock Markets In Japan And Singapore

Author

Listed:
  • Tsang-Yao CHANG

    (Feng Chia University, Taichung, Taiwan)

  • Hao FANG

    (Department of Assets and Property Management at Hwa Hsia Institute of Technology, Taipei, Taiwan)

  • Yen-Hsien LEE

    (Department of Finance at Chung Yuan Christian University, Taiwan)

Abstract

This paper uses a powerful Autoregressive Distributed Lag (ADL) test for the threshold cointegration proposed by Li and Lee (2010) to examine the cointegration equilibrium between Investing in real estate investment trusts (REITs) and the stock markets in Japan and Singapore and between the J-REIT and S-REIT markets. The empirical results indicate that there is a long-run equilibrium between REITs and the stock markets in Japan and Singapore but no equilibrium between the J-REIT and S-REIT markets. The results of the Granger causality test, based on the Threshold Error- Correction Model (TECM), indicate that there is a wealth effect and a credit price effect in Japan, a wealth effect in Singapore, and a feedback effect between the J-REIT and S-REIT markets. Our results offer important implications for investors seeking to gain from arbitrage or to diversify in these two Asian countries, which have the largest market capitalisations of REITs in Asia.

Suggested Citation

  • Tsang-Yao CHANG & Hao FANG & Yen-Hsien LEE, 2015. "Nonlinear A Djustment To The Long-Run Equilibrium Between The Reit And The Stock Markets In Japan And Singapore," Journal for Economic Forecasting, Institute for Economic Forecasting, vol. 0(3), pages 27-38, September.
    • Handle: RePEc:rjr:romjef:v::y:2015:i:3:p:27-38
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    References listed on IDEAS

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    Cited by:

    1. Gil-Alana, Luis A. & Yaya, OlaOluwa S, 2018. "How do Stocks in BRICS co-move with REITs?," MPRA Paper 88753, University Library of Munich, Germany.
    2. Dejan ŽIVKOV & Jovan NJEGIĆ & Ivan MILENKOVIĆ, 2018. "Interrelationship between DAX Index and Four Largest Eastern European Stock Markets," Journal for Economic Forecasting, Institute for Economic Forecasting, vol. 0(3), pages 88-103, September.
    3. Gil-Alana, Luis A. & Yaya, OlaOluwa S. & Akinsomi, Omokolade & Coskun, Yener, 2020. "How do stocks in BRICS co-move with real estate stocks?," International Review of Economics & Finance, Elsevier, vol. 69(C), pages 93-101.

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    More about this item

    Keywords

    Real Estate; Stock ; ADL test; Threshold cointegration; Threshold Error- Correction Model;
    All these keywords.

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • L85 - Industrial Organization - - Industry Studies: Services - - - Real Estate Services
    • D53 - Microeconomics - - General Equilibrium and Disequilibrium - - - Financial Markets
    • C58 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Financial Econometrics
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade

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