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Time dependent behavior of the Asian and the US REITs around the subprime crisis

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  • Chien‐Yun Chang
  • Jian‐Hsin Chou
  • Hung‐Gay Fung

Abstract

Purpose - The study uses an AR(1)‐EGARCH(1,1) model to investigate the pricing behaviors of the real estate investment trusts (REITs) for four countries (Australia, Japan, Taiwan and the USA) before and after the 2007 financial crisis. Design/methodology/approach - The study uses an AR(1)‐EGARCH(1,1) model to investigate the pricing behaviors of the REITs. Findings - The results show that after the financial crisis, REITS returns show a stronger linkage to the overall market returns but they are not sensitive to expected interest rate movements, except for the Taiwanese REIT market, which shows a negative and significant reaction to the interest rates. There are stronger asymmetric effects of good and bad news on REIT returns particularly after the post financial crisis for the four REIT markets. Research limitations/implications - An examination of the relationship between REIT and the stock market provides information as how REIT provides an effective device related to the stock portfolio diversification. Practical implications - It would be interesting to see how the Asian REIT markets differ from the US market on return and risk behavior. Originality/value - The 2007 subprime crisis happened because of the decline of the real estate market prices in the USA. It represents a special opportunity to examine the time‐dependent behavior of REIT returns in a turbulent market environment.

Suggested Citation

  • Chien‐Yun Chang & Jian‐Hsin Chou & Hung‐Gay Fung, 2012. "Time dependent behavior of the Asian and the US REITs around the subprime crisis," Journal of Property Investment & Finance, Emerald Group Publishing Limited, vol. 30(3), pages 282-303, April.
    • Handle: RePEc:eme:jpifpp:v:30:y:2012:i:3:p:282-303
    DOI: 10.1108/14635781211223833
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    3. Robbie Lin & Chyi Lin Lee & Graeme Newell, 2019. "The significance of Residential REITs in Japan as an Institutionalized property sector," ERES eres2019_122, European Real Estate Society (ERES).

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