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REIT markets and rational speculative bubbles: an empirical investigation

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  • George A. Waters
  • James E. Payne

Abstract

This study uses the momentum threshold autoregressive (MTAR) model and the residuals-augmented Dickey-Fuller (RADF) approach to test for the presence of Evans' (1991) periodically collapsing bubbles in four real estate investment trusts (REIT) classifications. The RADF test shows evidence of bubbles, but the results of the MTAR test are mixed. The MTAR test shows asymmetric adjustment for each REIT market with the exception of hybrid REITs, but only mortgage REITs show evidence of bubbles, which turn out to be negative meaning the price falls substantially below the level warranted by fundamentals.

Suggested Citation

  • George A. Waters & James E. Payne, 2007. "REIT markets and rational speculative bubbles: an empirical investigation," Applied Financial Economics, Taylor & Francis Journals, vol. 17(9), pages 747-753.
  • Handle: RePEc:taf:apfiec:v:17:y:2007:i:9:p:747-753
    DOI: 10.1080/09603100600735369
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    References listed on IDEAS

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    1. Im, K.S., 1996. "Least Square Approach to Non-Normal Disturbances," Cambridge Working Papers in Economics 9603, Faculty of Economics, University of Cambridge.
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    Cited by:

    1. Escobari, Diego & Jafarinejad, Mohammad, 2016. "Date stamping bubbles in Real Estate Investment Trusts," The Quarterly Review of Economics and Finance, Elsevier, vol. 60(C), pages 224-230.
    2. Maximilian Brauers & Matthias Thomas & Joachim Zietz, 2014. "Are There Rational Bubbles in REITs? New Evidence from a Complex Systems Approach," The Journal of Real Estate Finance and Economics, Springer, vol. 49(2), pages 165-184, August.
    3. Cuñado, J. & Gil-Alana, L.A. & Perez de Gracia, F., 2012. "Testing for persistent deviations of stock prices to dividends in the Nasdaq index," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 391(20), pages 4675-4685.
    4. Waters, George A., 2008. "Unit root testing for bubbles: A resurrection?," Economics Letters, Elsevier, vol. 101(3), pages 279-281, December.
    5. Chen, Shyh-Wei & Hsu, Chi-Sheng & Xie, Zixong, 2016. "Are there periodically collapsing bubbles in the stock markets? New international evidence," Economic Modelling, Elsevier, vol. 52(PB), pages 442-451.
    6. Valadkhani, Abbas, 2013. "The pricing behaviour of Australian banks and building societies in the residential mortgage market," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 26(C), pages 133-151.
    7. Lee, Chien-Chiang & Lee, Cheng-Feng & Lee, Chi-Chuan, 2014. "Asymmetric dynamics in REIT prices: Further evidence based on quantile regression analysis," Economic Modelling, Elsevier, vol. 42(C), pages 29-37.
    8. Diego Escobari & Damian Damianov & Andres Bello, 2015. "A time series test to identify housing bubbles," Journal of Economics and Finance, Springer;Academy of Economics and Finance, vol. 39(1), pages 136-152, January.
    9. Keith Anderson & Chris Brooks & Sotiris Tsolacos, 2009. "Testing for periodically collapsing rational speculative bubbles in US REITs," ICMA Centre Discussion Papers in Finance icma-dp2009-11, Henley Business School, Reading University.
    10. Chen, Shyh-Wei & Xie, Zixiong, 2017. "Asymmetric adjustment and smooth breaks in dividend yields: Evidence from international stock markets," International Review of Economics & Finance, Elsevier, vol. 48(C), pages 339-354.
    11. Xie, Zixiong & Chen, Shyh-Wei, 2015. "Are there periodically collapsing bubbles in the REIT markets? New evidence from the US," Research in International Business and Finance, Elsevier, vol. 33(C), pages 17-31.
    12. Adämmer, Philipp & Bohl, Martin T., 2015. "Speculative bubbles in agricultural prices," The Quarterly Review of Economics and Finance, Elsevier, vol. 55(C), pages 67-76.
    13. Roselyne Joyeux & George Milunovich, 2015. "Speculative bubbles, financial crises and convergence in global real estate investment trusts," Applied Economics, Taylor & Francis Journals, vol. 47(27), pages 2878-2898, June.
    14. Ohannes George Paskelian & M. Kabir Hassan & Kathryn Whittaker Huff, 2011. "Are there bubbles in the REITs market? New evidence using regime-switching approach," Applied Financial Economics, Taylor & Francis Journals, vol. 21(19), pages 1451-1461.

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