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A Vector Error Correction Model (VECM) of FTSE/JSE SA Listed Property Index and FTSE/JSE SA Capped Property Index

In: Advances in Panel Data Analysis in Applied Economic Research

Author

Listed:
  • Coenraad C. A. Labuschagne

    (University of Johannesburg)

  • Niel Oberholzer

    (University of Johannesburg)

  • Pierre J. Venter

    (University of Johannesburg)

Abstract

In this paper, the efficient market hypothesis (EMH) will be investigated from an empirical and theoretical basis. The closing (Close t ), intraday high (High t ), intraday low (Low t ) and opening (Open t ) values of the FTSE/JSE SA Listed Property Index (FTJ253) and the FTSE/JSE Capped Property Index (FTJ254)will explore the impact on returns resulting from a one standard deviation shock. The examination of the interrelationship between the closing (Close t ), intraday high (High t ), intraday low (Low t ) and opening (Open t ) values of the FTSE/JSE SA Listed Property Index (FTJ253) and the FTSE/JSE Capped Property Index (FTJ254) was conducted by making use of the Johansen cointegration test, a vector error correction model (VECM) and an impulse response function. The results of these tests provided an indication of the short- and long-run dynamics of all the variables included and the reaction of the variables to a one standard deviation shock. The results obtain indicate that there is an opportunity for arbitrage when the price deviates from the long-run equilibrium until a new equilibrium is reached.

Suggested Citation

  • Coenraad C. A. Labuschagne & Niel Oberholzer & Pierre J. Venter, 2018. "A Vector Error Correction Model (VECM) of FTSE/JSE SA Listed Property Index and FTSE/JSE SA Capped Property Index," Springer Proceedings in Business and Economics, in: Nicholas Tsounis & Aspasia Vlachvei (ed.), Advances in Panel Data Analysis in Applied Economic Research, chapter 0, pages 95-111, Springer.
    • Handle: RePEc:spr:prbchp:978-3-319-70055-7_8
    DOI: 10.1007/978-3-319-70055-7_8
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