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Random Walks and Market Efficiency: Evidence from International Real Estate Markets

Robert T. Kleiman (), James Payne () and Anandi P. Sahu ()
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Robert T. Kleiman: York University, Toronto, Ontario M3J 1P3
Anandi P. Sahu: Oakland University, Rochester, MI 48309

Journal of Real Estate Research, 2002, vol. 24, issue 3, 279-298

Abstract: This study performs tests of the random walk hypothesis for international commercial real estate markets utilizing stock market indices of real estate share prices for three geographical regions: Europe, Asia and North America. The augmented Dickey-Fuller and Phillips-Perron unit root tests and Cochrane variance ratio test find that each of these markets (as well as associated broader stock markets) exhibits random walk behavior. Moreover, a non-parametric runs test provides support for weak-form market efficiency in the real estate markets. In addition, Johansen-Juselius co-integration analysis reveals that all three markets appear co-integrated and share a common long-run stochastic trend. Results of co-integration analyses and vector error correction models suggest that diversification benefits through international real estate securities can only be achieved in the short run.

JEL-codes: L85 (search for similar items in EconPapers)
Date: 2002
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