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Real Interest Regimes and Real Estate Performance: A Comparison of UK and US Markets

Linear models of market performance may be misspecified if the market is subdivided into distinct regimes exhibiting different behavior. Price movements in the United States real estate investment trusts and United Kingdom property companies markets are explored using a threshold autoregressive (TAR) model with regimes defined by the real rate of interest. In both U.S. and U.K. markets, distinctive behavior emerges, with the TAR model offering better predictive power than a more conventional linear autoregressive model. The research points to the possibility of developing trading rules to exploit the systematically different behavior across regimes.

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Article provided by American Real Estate Society in its journal Journal of Real Estate Research.

Volume (Year): 16 (1998)
Issue (Month): 3 ()
Pages: 339-356

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Handle: RePEc:jre:issued:v:16:n:3:1998:p:339-356
Contact details of provider: Postal: American Real Estate Society Clemson University School of Business & Behavioral Science Department of Finance 401 Sirrine Hall Clemson, SC 29634-1323
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Order Information: Postal: Diane Quarles American Real Estate Society Manager of Member Services Clemson University Box 341323 Clemson, SC 29634-1323
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  1. Donald Robertson & James Symons, 1993. "Real Interest Rates and Index Linked Gilts," CEP Discussion Papers dp0181, Centre for Economic Performance, LSE.
  2. Simon M. Potter, 1993. "A Nonlinear Approach to U.S. GNP," UCLA Economics Working Papers 693, UCLA Department of Economics.
  3. Pesaran, H.M. & Potter, S.M., 1995. "A Floor and Ceiling Model of U.S. Output," Cambridge Working Papers in Economics 9407, Faculty of Economics, University of Cambridge.
  4. Charles Engel, 1991. "Can the Markov switching model forecast exchange rates?," Research Working Paper 91-04, Federal Reserve Bank of Kansas City.
  5. Fama, Eugene F & French, Kenneth R, 1988. "Permanent and Temporary Components of Stock Prices," Journal of Political Economy, University of Chicago Press, vol. 96(2), pages 246-73, April.
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  8. Joseph Gyourko & Donald B. Keim, 1992. "What Does the Stock Market Tell Us About Real Estate Returns?," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 20(3), pages 457-485.
  9. Hamilton, James D, 1989. "A New Approach to the Economic Analysis of Nonstationary Time Series and the Business Cycle," Econometrica, Econometric Society, vol. 57(2), pages 357-84, March.
  10. C. Lizieri & S. Satchell, 1994. "Property shares and the equity market: exploring the linkages," ERES eres1994_132, European Real Estate Society (ERES).
  11. Richard Barkham & David Geltner, 1995. "Price Discovery in American and British Property Markets," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 23(1), pages 21-44.
  12. West, Kenneth D, 1988. "Asymptotic Normality, When Regressors Have a Unit Root," Econometrica, Econometric Society, vol. 56(6), pages 1397-1417, November.
  13. Balvers, Ronald J & Cosimano, Thomas F & McDonald, Bill, 1990. " Predicting Stock Returns in an Efficient Market," Journal of Finance, American Finance Association, vol. 45(4), pages 1109-28, September.
  14. James M. Poterba & Lawrence H. Summers, 1984. "The Persistence of Volatility and Stock Market Fluctuations," NBER Working Papers 1462, National Bureau of Economic Research, Inc.
  15. Pradeep K. Yadav & Peter F. Pope & Krishna Paudyal, 1994. "Threshold Autoregressive Modeling In Finance: The Price Differences Of Equivalent Assets," Mathematical Finance, Wiley Blackwell, vol. 4(2), pages 205-221.
  16. Glenn R. Mueller & Keith R. Pauley, 1995. "The Effect of Interest-Rate Movements on Real Estate Investment Trusts," Journal of Real Estate Research, American Real Estate Society, vol. 10(3), pages 319-326.
  17. Joseph L. Pagliari, Jr. & James R. Webb, 1995. "A Fundamental Examination of Securitized and Unsecuritized Real Estate," Journal of Real Estate Research, American Real Estate Society, vol. 10(4), pages 381-426.
  18. Joseph Gyourko & Donald B. Keim, . "What Does the Stock Market Tell Us About Real Estate Returns? (Revision of 18-91) (Reprint 030)," Rodney L. White Center for Financial Research Working Papers 11-92, Wharton School Rodney L. White Center for Financial Research.
  19. David Geltner, 1993. "Temporal Aggregation in Real Estate Return Indices," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 21(2), pages 141-166.
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