Testing for Periodically Collapsing Rational Speculative Bubbles in U.S. REITs

Keith Anderson, Chris Brooks and Sotiris Tsolacos

Journal of Real Estate Portfolio Management, 2011, vol. 17, issue 3, 227-241

Abstract: Executive Summary. This paper is the first to utilize a direct test for periodic, partially collapsing speculative bubbles in real estate investment trust (REIT) prices in the United States. A long history of data is employed for the All, Mortgage, Hybrid, and Equity REIT categories. This approach is more powerful than existing tests and some support is found for the presence of speculative bubbles. Time-varying probabilities are computed for being in the surviving and collapsing regimes. The paper shows how this information could be used in developing a signal to inform investors' decisions on timing a market exit, thereby shielding their portfolios from the effects of periodically bursting bubbles or indeed taking advantage of such bubbles to both increase returns and reduce risk.

Date: 2011
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Working Paper: Testing for periodically collapsing rational speculative bubbles in US REITs (2009)
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DOI: 10.1080/10835547.2011.12089906

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