Time dependent behavior of the Asian and the US REITs around the subprime crisis

Chien‐Yun Chang, Jian‐Hsin Chou and Hung‐Gay Fung

Journal of Property Investment & Finance, 2012, vol. 30, issue 3, 282-303

Abstract: Purpose - The study uses an AR(1)‐EGARCH(1,1) model to investigate the pricing behaviors of the real estate investment trusts (REITs) for four countries (Australia, Japan, Taiwan and the USA) before and after the 2007 financial crisis. Design/methodology/approach - The study uses an AR(1)‐EGARCH(1,1) model to investigate the pricing behaviors of the REITs. Findings - The results show that after the financial crisis, REITS returns show a stronger linkage to the overall market returns but they are not sensitive to expected interest rate movements, except for the Taiwanese REIT market, which shows a negative and significant reaction to the interest rates. There are stronger asymmetric effects of good and bad news on REIT returns particularly after the post financial crisis for the four REIT markets. Research limitations/implications - An examination of the relationship between REIT and the stock market provides information as how REIT provides an effective device related to the stock portfolio diversification. Practical implications - It would be interesting to see how the Asian REIT markets differ from the US market on return and risk behavior. Originality/value - The 2007 subprime crisis happened because of the decline of the real estate market prices in the USA. It represents a special opportunity to examine the time‐dependent behavior of REIT returns in a turbulent market environment.

Keywords: Real estate investment trusts; Stock market returns; Interest risk; Asymmetric effects; Real estate; Investments; Trusts; Australia; Japan; Taiwan; United States of America (search for similar items in EconPapers)
Date: 2012
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Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:eme:jpifpp:v:30:y:2012:i:3:p:282-303

DOI: 10.1108/14635781211223833

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