Testing the predictability and efficiency of securitized real estate markets

Felix Schindler, Nico Rottke and Roland Füss ()

No 09-054, ZEW Discussion Papers from ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research

Abstract: This paper conducts tests of the random walk hypothesis and market efficiency for 14 national public real estate markets. Random walk properties of equity prices influence the return dynamics and determine the trading strategies of investors. To examine the stochastic properties of local real estate index returns and to test the hypothesis that public real estate stock prices follow a random walk, the single variance ratio tests of Lo and MacKinlay (1988) as well as the multiple variance ratio test of Chow and Denning (1993) are employed. Weak-form market efficiency is tested directly using non-parametric runs tests. Empirical evidence shows that weekly stock prices in major securitized real estate markets do not follow a random walk. The empirical findings of return predictability suggest that investors might be able to develop trading strategies allowing them to earn excess returns compared to a buy-and-hold strategy. --

Keywords: Securitized real estate; weak-form market efficiency; random walk hypothesis; variance ratio tests; runs test; trading strategies (search for similar items in EconPapers)
JEL-codes: G12 G14 G15 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-ure
Date: 2009
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Persistent link: http://EconPapers.repec.org/RePEc:zbw:zewdip:09054

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