IDEAS home Printed from https://ideas.repec.org/a/kap/jrefec/v46y2013i3p516-542.html
   My bibliography  Save this article

A Time Series Analysis of U.K. Construction and Real Estate Indices

Author

Listed:
  • Jorge Belaire-Franch
  • Kwaku Opong

Abstract

This study assess the nonlinear behavior of U.K. Construction and Real Estate indices. Standard unit root tests show that both time series are I(1) processes. However, the empirical results show that the returns series for both indices deviate from the null hypothesis of white noise. Moreover, we have found evidence of nonlinearity but strong evidence against chaos for the returns series. Further tests show that the source of nonlinearity is rather different. Hence, the Construction index returns series displays weak nonlinear forecastability, typical of nonlinear deterministic processes, whereas the Real Estate index could be characterized as a stationary process about a nonlinear deterministic trend. Copyright Springer Science+Business Media, LLC 2013

Suggested Citation

  • Jorge Belaire-Franch & Kwaku Opong, 2013. "A Time Series Analysis of U.K. Construction and Real Estate Indices," The Journal of Real Estate Finance and Economics, Springer, vol. 46(3), pages 516-542, April.
    • Handle: RePEc:kap:jrefec:v:46:y:2013:i:3:p:516-542
    DOI: 10.1007/s11146-011-9327-y
    as

    Download full text from publisher

    File URL: http://hdl.handle.net/10.1007/s11146-011-9327-y
    Download Restriction: Access to full text is restricted to subscribers.
    File URL: https://libkey.io/10.1007/s11146-011-9327-y?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Shintani, Mototsugu & Linton, Oliver, 2004. "Nonparametric neural network estimation of Lyapunov exponents and a direct test for chaos," Journal of Econometrics, Elsevier, vol. 120(1), pages 1-33, May.
    2. Pierre Perron & Serena Ng, 1996. "Useful Modifications to some Unit Root Tests with Dependent Errors and their Local Asymptotic Properties," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 63(3), pages 435-463.
    3. Andrew W. Lo, A. Craig MacKinlay, 1988. "Stock Market Prices do not Follow Random Walks: Evidence from a Simple Specification Test," The Review of Financial Studies, Society for Financial Studies, vol. 1(1), pages 41-66.
    4. Opong, Kwaku K. & Mulholland, Gwyneth & Fox, Alan F. & Farahmand, Kambiz, 1999. "The behaviour of some UK equity indices: An application of Hurst and BDS tests1," Journal of Empirical Finance, Elsevier, vol. 6(3), pages 267-282, September.
    5. Davidson, Russell & Flachaire, Emmanuel, 2008. "The wild bootstrap, tamed at last," Journal of Econometrics, Elsevier, vol. 146(1), pages 162-169, September.
    6. Dryden, Myles M, 1970. "A Statistical Study of U.K. Share Prices," Scottish Journal of Political Economy, Scottish Economic Society, vol. 17(3), pages 369-389, November.
    7. Scheinkman, Jose A & LeBaron, Blake, 1989. "Nonlinear Dynamics and Stock Returns," The Journal of Business, University of Chicago Press, vol. 62(3), pages 311-337, July.
    8. Psaradakis Zacharias, 2000. "p-Value Adjustments for Multiple Tests for Nonlinearity," Studies in Nonlinear Dynamics & Econometrics, De Gruyter, vol. 4(3), pages 1-8, October.
    9. Gaia Garino & Lucio Sarno, 2004. "Speculative Bubbles in U.K. House Prices: Some New Evidence," Southern Economic Journal, John Wiley & Sons, vol. 70(4), pages 777-795, April.
    10. William A. Barnett & A. Ronald Gallant & Melvin J. Hinich & Jochen A. Jungeilges & Daniel T. Kaplan, 2004. "A Single-Blind Controlled Competition Among Tests for Nonlinearity and Chaos," Contributions to Economic Analysis, in: Functional Structure and Approximation in Econometrics, pages 581-615, Emerald Group Publishing Limited.
    11. Bryan Macgregor & Gregory Schwann, 2003. "Common features in UK commercial real estate returns," Journal of Property Research, Taylor & Francis Journals, vol. 20(1), pages 23-48, January.
    12. Willey, Thomas, 1992. "Testing for nonlinear dependence in daily stock indices," Journal of Economics and Business, Elsevier, vol. 44(1), pages 63-76, February.
    13. Whitney K. Newey & Kenneth D. West, 1994. "Automatic Lag Selection in Covariance Matrix Estimation," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 61(4), pages 631-653.
    14. Lo, Andrew W. & MacKinlay, A. Craig, 1989. "The size and power of the variance ratio test in finite samples : A Monte Carlo investigation," Journal of Econometrics, Elsevier, vol. 40(2), pages 203-238, February.
    15. Campbell, Bryan & Dufour, Jean-Marie, 1997. "Exact Nonparametric Tests of Orthogonality and Random Walk in the Presence of a Drift Parameter," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 38(1), pages 151-173, February.
    16. Johansen, Soren & Juselius, Katarina, 1990. "Maximum Likelihood Estimation and Inference on Cointegration--With Applications to the Demand for Money," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 52(2), pages 169-210, May.
    17. Pan, Ming-Shiun & Liu, Y Angela & Bastin, Hamid, 1996. "An Examination of the Short-Term and Long-Term Behavior of Foreign Exchange Rates," The Financial Review, Eastern Finance Association, vol. 31(3), pages 603-622, August.
    18. Abhyankar, A & Copeland, L S & Wong, W, 1997. "Uncovering Nonlinear Structure in Real-Time Stock-Market Indexes: The S&P 500, the DAX, the Nikkei 225, and the FTSE-100," Journal of Business & Economic Statistics, American Statistical Association, vol. 15(1), pages 1-14, January.
    19. Wright, Jonathan H, 2000. "Alternative Variance-Ratio Tests Using Ranks and Signs," Journal of Business & Economic Statistics, American Statistical Association, vol. 18(1), pages 1-9, January.
    20. Andrews, Donald W K, 1991. "Heteroskedasticity and Autocorrelation Consistent Covariance Matrix Estimation," Econometrica, Econometric Society, vol. 59(3), pages 817-858, May.
    21. Chris Brooks & Sotiris Tsolacos, 2001. "Linkages between property asset returns and interest rates: evidence for the UK," Applied Economics, Taylor & Francis Journals, vol. 33(6), pages 711-719.
    22. Belaire-Franch, Jorge & Opong, Kwaku K., 2005. "Some evidence of random walk behavior of Euro exchange rates using ranks and signs," Journal of Banking & Finance, Elsevier, vol. 29(7), pages 1631-1643, July.
    23. Luger, Richard, 2003. "Exact non-parametric tests for a random walk with unknown drift under conditional heteroscedasticity," Journal of Econometrics, Elsevier, vol. 115(2), pages 259-276, August.
    24. Timo Teräsvirta & Chien‐Fu Lin & Clive W. J. Granger, 1993. "Power Of The Neural Network Linearity Test," Journal of Time Series Analysis, Wiley Blackwell, vol. 14(2), pages 209-220, March.
    25. Serena Ng & Pierre Perron, 2001. "LAG Length Selection and the Construction of Unit Root Tests with Good Size and Power," Econometrica, Econometric Society, vol. 69(6), pages 1519-1554, November.
    26. Liu, Christina Y & He, Jia, 1991. "A Variance-Ratio Test of Random Walks in Foreign Exchange Rates," Journal of Finance, American Finance Association, vol. 46(2), pages 773-785, June.
    27. Cushman David O., 2002. "Nonlinear Trends and Co-trending in Canadian Money Demand," Studies in Nonlinear Dynamics & Econometrics, De Gruyter, vol. 6(1), pages 1-29, April.
    28. Hsieh, David A, 1991. "Chaos and Nonlinear Dynamics: Application to Financial Markets," Journal of Finance, American Finance Association, vol. 46(5), pages 1839-1877, December.
    29. Bierens, Herman J., 1997. "Testing the unit root with drift hypothesis against nonlinear trend stationarity, with an application to the US price level and interest rate," Journal of Econometrics, Elsevier, vol. 81(1), pages 29-64, November.
    30. Finkenstadt, Barbel & Kuhbier, Peter, 1995. "Forecasting Nonlinear Economic Time Series: A Simple Test to Accompany the Nearest Neighbor Approach," Empirical Economics, Springer, vol. 20(2), pages 243-263.
    31. Robert T. Kleiman & James E. Payne & Anandi P. Sahu, 2002. "Random Walks and Market Efficiency: Evidence from International Real Estate Markets," Journal of Real Estate Research, American Real Estate Society, vol. 24(3), pages 279-298.
    32. Abhyankar, A & Copeland, L S & Wong, W, 1995. "Nonlinear Dynamics in Real-Time Equity Market Indices: Evidence from the United Kingdom," Economic Journal, Royal Economic Society, vol. 105(431), pages 864-880, July.
    33. Whang, Yoon-Jae & Linton, Oliver, 1999. "The asymptotic distribution of nonparametric estimates of the Lyapunov exponent for stochastic time series," Journal of Econometrics, Elsevier, vol. 91(1), pages 1-42, July.
    34. Jorge Belaire-Franch, 2003. "A Note on Resampling the Integration Across the Correlation Integral with Alternative Ranges," Econometric Reviews, Taylor & Francis Journals, vol. 22(4), pages 337-349.
    35. James Payne & Anandi Sahu, 2004. "Random walks, cointegration, and the transmission of shocks across global real estate and equity markets," Journal of Economics and Finance, Springer;Academy of Economics and Finance, vol. 28(2), pages 198-210, June.
    36. S. W. Cunningham, 1973. "The Predictability of British Stock Market Prices," Journal of the Royal Statistical Society Series C, Royal Statistical Society, vol. 22(3), pages 315-331, November.
    37. Michael Connock, 2002. "Is arbitrage possible in the housing market?," Applied Economics Letters, Taylor & Francis Journals, vol. 9(2), pages 91-93.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Patrick Krieger & Carsten Lausberg & Kristin Wellner, 2018. "Einblicke in die Gründe für nicht-normalverteilte Immobilienrenditen: eine explorative Untersuchung deutscher Wohnimmobilienportfolios [Insights into the reasons for non-normal real estate returns:," Zeitschrift für Immobilienökonomie (German Journal of Real Estate Research), Springer;Gesellschaft für Immobilienwirtschaftliche Forschung e. V., vol. 4(1), pages 49-79, November.
    2. Simeon Coleman Author name: Vitor Leone, 2012. "Time-series characteristics of UK commercial property returns: Testing for multiple changes in persistence," NBS Discussion Papers in Economics 2012/03, Economics, Nottingham Business School, Nottingham Trent University.
    3. Simeon Coleman & Vitor Leone, 2015. "An investigation of regime shifts in UK commercial property returns: a time series analysis," Applied Economics, Taylor & Francis Journals, vol. 47(60), pages 6479-6492, December.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Jorge Belaire-Franch & Kwaku Opong, 2005. "A Variance Ratio Test of the Behaviour of Some FTSE Equity Indices Using Ranks and Signs," Review of Quantitative Finance and Accounting, Springer, vol. 24(1), pages 93-107, January.
    2. Amélie Charles & Olivier Darné, 2009. "Variance‐Ratio Tests Of Random Walk: An Overview," Journal of Economic Surveys, Wiley Blackwell, vol. 23(3), pages 503-527, July.
    3. Yen-Hsien Lee, 2010. "The Impact Of Deregulation On Stock Market Efficiency," The International Journal of Business and Finance Research, The Institute for Business and Finance Research, vol. 4(2), pages 165-176.
    4. Belaire-Franch, Jorge & Opong, Kwaku K., 2005. "Some evidence of random walk behavior of Euro exchange rates using ranks and signs," Journal of Banking & Finance, Elsevier, vol. 29(7), pages 1631-1643, July.
    5. Ntim, Collins G. & English, John & Nwachukwu, Jacinta & Wang, Yan, 2015. "On the efficiency of the global gold markets," International Review of Financial Analysis, Elsevier, vol. 41(C), pages 218-236.
    6. Hung, Jui-Cheng, 2009. "Deregulation and liberalization of the Chinese stock market and the improvement of market efficiency," The Quarterly Review of Economics and Finance, Elsevier, vol. 49(3), pages 843-857, August.
    7. Aye, Goodness C. & Gil-Alana, Luis A. & Gupta, Rangan & Wohar, Mark E., 2017. "The efficiency of the art market: Evidence from variance ratio tests, linear and nonlinear fractional integration approaches," International Review of Economics & Finance, Elsevier, vol. 51(C), pages 283-294.
    8. Yang, Yan-Hong & Shao, Ying-Hui & Shao, Hao-Lin & Stanley, H. Eugene, 2019. "Revisiting the weak-form efficiency of the EUR/CHF exchange rate market: Evidence from episodes of different Swiss franc regimes," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 523(C), pages 734-746.
    9. Amelie Charles & Olivier Darne, 2009. "Testing for Random Walk Behavior in Euro Exchange Rates," Economie Internationale, CEPII research center, issue 119, pages 25-45.
    10. Shyh-wei Chen, 2009. "Random walks in asian foreign exchange markets:evidence from new multiple variance ratio tests," Economics Bulletin, AccessEcon, vol. 29(2), pages 1296-1307.
    11. Barnett, William A. & Serletis, Apostolos & Serletis, Demitre, 2015. "Nonlinear And Complex Dynamics In Economics," Macroeconomic Dynamics, Cambridge University Press, vol. 19(8), pages 1749-1779, December.
    12. Charles, Amélie & Darné, Olivier & Kim, Jae H., 2012. "Exchange-rate return predictability and the adaptive markets hypothesis: Evidence from major foreign exchange rates," Journal of International Money and Finance, Elsevier, vol. 31(6), pages 1607-1626.
    13. Kian-Ping Lim & M. Azali & M.S. Habibullah & Venus Khim-Sen Liew, 2003. "Are Non-Linear Dynamics a Universal Occurrence? Further Evidence From Asian Stock Markets," Finance 0308001, University Library of Munich, Germany.
    14. Azad, A.S.M. Sohel, 2009. "Random walk and efficiency tests in the Asia-Pacific foreign exchange markets: Evidence from the post-Asian currency crisis data," Research in International Business and Finance, Elsevier, vol. 23(3), pages 322-338, September.
    15. Anoop S. KUMAR & Bandi KAMAIAH, 2016. "Efficiency, non-linearity and chaos: evidences from BRICS foreign exchange markets," Theoretical and Applied Economics, Asociatia Generala a Economistilor din Romania - AGER, vol. 0(1(606), S), pages 103-118, Spring.
    16. Seok Young Hong & Oliver Linton & Hui Jun Zhang, 2014. "Multivariate variance ratio statistics," CeMMAP working papers 29/14, Institute for Fiscal Studies.
    17. Ayan Bhattacharya & Rudra Sensarma, 2013. "Non-linearities in Emerging Financial Markets: Evidence from India," IIM Kozhikode Society & Management Review, , vol. 2(2), pages 165-175, July.
    18. Jui-Cheng Hung & Yen-Hsien Lee & Tung-Yueh Pai, 2009. "Examining market efficiency for large- and small-capitalization of TOPIX and FTSE stock indices," Applied Financial Economics, Taylor & Francis Journals, vol. 19(9), pages 735-744.
    19. Charles, Amélie & Darné, Olivier & Fouilloux, Jessica, 2011. "Testing the martingale difference hypothesis in CO2 emission allowances," Economic Modelling, Elsevier, vol. 28(1), pages 27-35.
    20. Luger, Richard, 2003. "Exact non-parametric tests for a random walk with unknown drift under conditional heteroscedasticity," Journal of Econometrics, Elsevier, vol. 115(2), pages 259-276, August.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:kap:jrefec:v:46:y:2013:i:3:p:516-542. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Sonal Shukla or Springer Nature Abstracting and Indexing (email available below). General contact details of provider: http://www.springer.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.