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Are the Global REIT Markets Efficient by a New Approach?

Author

Listed:
  • Hao Fang
  • Yen-Hsien Lee

Abstract

This study uses a panel KSS test by Nuri Ucar and Tolga Omay (2009), with a Fourier function based on the sequential panel selection method (SPSM) procedure proposed by Georgios Chortareas and George Kapetanios (2009) to test the efficiency of REIT markets in 16 countries from 28 March 2008 to 27 June 2011. A Fourier approximation often captures the behavior of an unknown break, and testing for a unit root increases its power to do so. Moreover, SPSM can determine the mix of I(0) and I(1) series in a panel setting to clarify how many and which are random walk processes. Our empirical results demonstrate that REIT markets are efficient in all sampled countries except the UK. Our results imply that investors in countries with efficient REIT markets can adopt more passive portfolio strategies. Key words: REIT, Efficiency, Sequential panel selection method, Panel KSS test with a Fourier function, Portfolio strategy.JEL: C23, C52, D53, G11, G14, L85.

Suggested Citation

  • Hao Fang & Yen-Hsien Lee, 2013. "Are the Global REIT Markets Efficient by a New Approach?," Panoeconomicus, Savez ekonomista Vojvodine, Novi Sad, Serbia, vol. 60(6), pages 743-757.
    • Handle: RePEc:voj:journl:v:60:y:2013:i:6:p:743-757:id:79
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    More about this item

    Keywords

    REIT; Efficiency; Sequential panel selection method; Panel KSS test with a Fourier function; Portfolio strategy;
    All these keywords.

    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • C52 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Evaluation, Validation, and Selection
    • D53 - Microeconomics - - General Equilibrium and Disequilibrium - - - Financial Markets
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • L85 - Industrial Organization - - Industry Studies: Services - - - Real Estate Services

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