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Testing the predictability and efficiency of securitized real estate markets

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  • Schindler, Felix
  • Rottke, Nico
  • Füss, Roland

Abstract

This paper conducts tests of the random walk hypothesis and market efficiency for 14 national public real estate markets. Random walk properties of equity prices influence the return dynamics and determine the trading strategies of investors. To examine the stochastic properties of local real estate index returns and to test the hypothesis that public real estate stock prices follow a random walk, the single variance ratio tests of Lo and MacKinlay (1988) as well as the multiple variance ratio test of Chow and Denning (1993) are employed. Weak-form market efficiency is tested directly using non-parametric runs tests. Empirical evidence shows that weekly stock prices in major securitized real estate markets do not follow a random walk. The empirical findings of return predictability suggest that investors might be able to develop trading strategies allowing them to earn excess returns compared to a buy-and-hold strategy. --

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Bibliographic Info

Paper provided by ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research in its series ZEW Discussion Papers with number 09-054.

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Date of creation: 2009
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Handle: RePEc:zbw:zewdip:09054

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Related research

Keywords: Securitized real estate; weak-form market efficiency; random walk hypothesis; variance ratio tests; runs test; trading strategies;

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Cited by:
  1. Felix Schindler, 2014. "Persistence and Predictability in UK House Price Movements," The Journal of Real Estate Finance and Economics, Springer, vol. 48(1), pages 132-163, January.
  2. Felix Schindler, 2013. "Predictability and Persistence of the Price Movements of the S&P/Case-Shiller House Price Indices," The Journal of Real Estate Finance and Economics, Springer, vol. 46(1), pages 44-90, January.

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