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

Coenraad C. A. Labuschagne (), Niel Oberholzer and Pierre J. Venter ()
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Coenraad C. A. Labuschagne: University of Johannesburg
Niel Oberholzer: University of Johannesburg
Pierre J. Venter: University of Johannesburg

Chapter Chapter 8 in Advances in Panel Data Analysis in Applied Economic Research, 2018, pp 95-111 from Springer

Abstract: 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.

Date: 2018
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Persistent link: https://EconPapers.repec.org/RePEc:spr:prbchp:978-3-319-70055-7_8

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DOI: 10.1007/978-3-319-70055-7_8

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