Stationarity and Co-Integration in Systems with Three National Real Estate Indices

F.C. Neil Myer (), Mukesh K. Chaudhry and James R. Webb ()
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F.C. Neil Myer: Department of Finance James J. Nance College of Business Administration Cleveland State University Cleveland, Ohio 44114, http://www.csuohio.edu/finance_department/index.htm
Mukesh K. Chaudhry: Department of Finance and Economics School of Business Northern State University 1200 South Jay Street Aberdeen, South Dakota 57401, http://business.northern.edu/
James R. Webb: Department of Finance James J. Nance College of Business Administration Cleveland State University Cleveland, Ohio 44114, http://www.csuohio.edu/finance_department/index.htm

Journal of Real Estate Research, 1997, vol. 13, issue 3, pages 369-381

Abstract: This study examines the stochastic properties of the commercial real estate wealth indices for three countries (the U.S., Canada, and the U.K.) and for several property types (aggregate, office, retail, and industrial). Each of the indices is tested for a unit root and all series are found to be nonstationary. Furthermore, all indices also indicate the presence of both drift and trend. The results are strongest when the indices are tested in real estate and exchange rate-adjusted form. Application of Johansen's model indicates that the system for the three countries shows evidence of co-integration for the aggregate, retail, office, and industrial properties. Again, the evidence is the strongest when the indices are tested in real and exchange rate-adjusted form. Hence, it is conceivable that inflationary expectations may be the factor that provides the common linkage between commercial real estate across national boundaries.

JEL-codes: L85 (search for similar items in EconPapers)
Date: 1997
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