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Price Reversal, Transaction Costs, and Arbitrage Profits in the Real Estate Securities Market

Jianping Mei and Bin Gao

The Journal of Real Estate Finance and Economics, 1995, vol. 11, issue 2, 153-65

Abstract: This paper studies the return reversals of exchange traded real estate securities using an arbitrage portfolio approach. Using the approach, we find that there exist significant return reversals in such securities. These return reversals could be exploited by arbitrage traders if trading costs can be ignored. However, the arbitrage profits disappear after deducting trading costs and taking into account the implicit cost of bid-ask spread. Thus, the real estate securities market is efficient at weekly intervals in the sense that one could not exploit the price reversals via some simple trading rules. Copyright 1995 by Kluwer Academic Publishers

Date: 1995
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The Journal of Real Estate Finance and Economics is currently edited by Steven R. Grenadier, James B. Kau and C.F. Sirmans

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