NONLINEAR A DJUSTMENT TO THE LONG-RUN EQUILIBRIUM BETWEEN THE REIT AND THE STOCK MARKETS IN JAPAN AND SINGAPORE

Tsangyao Chang, Hao Fang () and Yen-Hsien Lee ()
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Hao Fang: Department of Assets and Property Management at Hwa Hsia Institute of Technology, Taipei, Taiwan
Yen-Hsien Lee: Department of Finance at Chung Yuan Christian University, Taiwan

Journal for Economic Forecasting, 2015, issue 3, 27-38

Abstract: This paper uses a powerful Autoregressive Distributed Lag (ADL) test for the threshold cointegration proposed by Li and Lee (2010) to examine the cointegration equilibrium between Investing in real estate investment trusts (REITs) and the stock markets in Japan and Singapore and between the J-REIT and S-REIT markets. The empirical results indicate that there is a long-run equilibrium between REITs and the stock markets in Japan and Singapore but no equilibrium between the J-REIT and S-REIT markets. The results of the Granger causality test, based on the Threshold Error- Correction Model (TECM), indicate that there is a wealth effect and a credit price effect in Japan, a wealth effect in Singapore, and a feedback effect between the J-REIT and S-REIT markets. Our results offer important implications for investors seeking to gain from arbitrage or to diversify in these two Asian countries, which have the largest market capitalisations of REITs in Asia.

Keywords: Real Estate; Stock; ADL test; Threshold cointegration, Threshold Error- Correction Model (search for similar items in EconPapers)
JEL-codes: C22 C58 D53 F14 G11 L85 (search for similar items in EconPapers)
Date: 2015
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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