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Substitutability between Equity REITs and Mortgage REITs

Author

Listed:
  • Ming-Long Lee

    () (National Yulin University of Science and Technology, Touliu, Yulin, Taiwan 640)

  • Kevin C.H. Chiang

    () (University of Alaska Fairbanks, Fairbanks, AK 99775)

Abstract

This study extends Seck’s (1996) approach to investigate the degree of substitutability between equity real estate investment trusts (EREITs) and mortgage real estate investment trusts (MREITs). The variance ratio test and the variance decomposition of forecast errors yield results indicating the existence of informational commonality between EREITs and MREITs. The findings indicate that the two types of REITs are substitutable. A direct implication is that investors who believe they have superior forecasting ability will be indifferent to invest in either type of REIT. Another implication is that REITs can be treated as a single asset class in constructing a diversified multi-asset portfolio.

Suggested Citation

  • Ming-Long Lee & Kevin C.H. Chiang, 2004. "Substitutability between Equity REITs and Mortgage REITs," Journal of Real Estate Research, American Real Estate Society, vol. 26(1), pages 95-114.
  • Handle: RePEc:jre:issued:v:26:n:1:2004:p:95-114
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    Cited by:

    1. repec:bla:abacus:v:53:y:2017:i:3:p:349-370 is not listed on IDEAS
    2. John Cotter & Simon Stevenson, 2006. "Multivariate Modeling of Daily REIT Volatility," The Journal of Real Estate Finance and Economics, Springer, vol. 32(3), pages 305-325, May.
    3. Simon Stevenson & James Young, "undated". "Capital Market Expectations and the London Office Market," Real Estate & Planning Working Papers rep-wp2011-09, Henley Business School, Reading University.
    4. Gwangheon Hong & Bong Lee, 2013. "Does Inflation Illusion Explain the Relation between REITs and Inflation?," The Journal of Real Estate Finance and Economics, Springer, vol. 47(1), pages 123-151, July.
    5. Cotter, John & Stevenson, Simon, 2004. "Uncovering Volatility Dynamics in Daily REIT Returns," MPRA Paper 3533, University Library of Munich, Germany, revised 2005.
    6. repec:kap:jrefec:v:54:y:2017:i:3:d:10.1007_s11146-016-9572-1 is not listed on IDEAS
    7. Paul Gallimore & J. Andrew Hansz & Wikrom Prombutr & Ying Zhang, 2014. "Long-term Cointegrative and Short-term Causal Relations among U.S. Real Estate Sectors," International Real Estate Review, Asian Real Estate Society, vol. 17(3), pages 359-394.
    8. Chiuling Lu & Yiuman Tse & Michael Williams, 2013. "Returns transmission, value at risk, and diversification benefits in international REITs: evidence from the financial crisis," Review of Quantitative Finance and Accounting, Springer, vol. 40(2), pages 293-318, February.
    9. Roland Füss & Felix Schindler, 2011. "Diversifikationsvorteile verbriefter Immobilienanlagen in einem Mixed‐Asset‐Portfolio," Perspektiven der Wirtschaftspolitik, Verein für Socialpolitik, vol. 12(2), pages 170-191, May.
    10. repec:kap:jrefec:v:56:y:2018:i:2:d:10.1007_s11146-017-9601-8 is not listed on IDEAS
    11. Kyriaki Begiazi & Dimitrios Asteriou & Keith Pilbeam, 2016. "A multivariate analysis of United States and global real estate investment trusts," International Economics and Economic Policy, Springer, vol. 13(3), pages 467-482, July.
    12. repec:ire:issued:v:20:n:03:2017:p:287-324 is not listed on IDEAS

    More about this item

    JEL classification:

    • L85 - Industrial Organization - - Industry Studies: Services - - - Real Estate Services

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