Dynamic modelling of real estate investment trusts and stock markets

Chien-Chiang Lee (), Mei-Se Chien and Tsoyu Calvin Lin

Economic Modelling, 2012, vol. 29, issue 2, 395-407

Abstract: Taiwan launched the first case of real estate securitization in 2005. The interrelationship between Taiwan Real Estate Investment Trusts (T-REITs) and the aggregate equity markets and segmented industries has drawn the interests of both investors and academia. This paper employs Toda and Yamamoto's (1995) procedure and the generalized impulse response approach to uncover the extent and the magnitude of the relationship between T-REITs and aggregate and segmented stock prices. We collected daily data of the first two issued T-REITs, Fubon No.1 and Cathay No. 1, from March 2005 to March 2010 and October 2005 to March 2010, respectively, to examine their causal relationships with aggregate stock markets, the financial sector, and the construction sector. The empirical results indicate that all variables have break points, reflecting shocks from the Subprime Mortgage Crisis or deregulation of the Qualified Domestic Institutional Investors (QDII) for Mainland Chinese to invest in Taiwan. We also discover that an individual T-REIT may lead or lag behind stock price indices due to its capitalization scale or business type. The transitory initial impacts of innovations in T-REITs on stock price indices are observed herein.

Keywords: Real estate securitization; Real estate investment trust; Stock price; Causality; Generalized impulse response approach (search for similar items in EconPapers)
JEL-codes: C32 G12 G15 (search for similar items in EconPapers)
Date: 2012
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Citations: View citations in EconPapers (4)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecmode:v:29:y:2012:i:2:p:395-407

DOI: 10.1016/j.econmod.2011.11.008

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