Abstract

http://ssrn.com/abstract=2010041
 


 



Fractional Cointegration Analysis of Securitized Real Estate


Camilo Serrano


IAZI AG - CIFI SA

Martin Hoesli


University of Geneva - Geneva School of Economics and Management (GSEM); University of Aberdeen - Business School; Swiss Finance Institute; University of Geneva - Geneva Finance Research Institute

February 23, 2012

Journal of Real Estate Finance and Economics, Vol. 44, No. 3, 2012

Abstract:     
This paper uses fractional cointegration analysis to examine whether long-run relations exist between securitized real estate returns and three sets of variables frequently used in the literature as the factors driving securitized real estate returns. That is, we examine whether such relationships are characterized by long memory (long-range dependence), short memory (short-range dependence), mean reversion (no long-run effects) or no mean reversion (no long-run equilibrium). The forecasting implications are also considered. Empirical analyses are conducted using data for the U.S., the U.K., and Australia. We find strong evidence of fractional cointegration between securitized real estate and the three sets of variables. Such relationships are mainly characterized by short memory although long memory is sometimes present. The use of fractional cointegration for forecasting purposes proves particularly useful since the start of the financial crisis.

Keywords: Fractional cointegration, Fractionally integrated error correction model (FIECM), Forecasting, Multifactor models, Securitized real estate, REITs

JEL Classification: G17, G11, C53


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Date posted: February 24, 2012  

Suggested Citation

Serrano, Camilo and Hoesli, Martin, Fractional Cointegration Analysis of Securitized Real Estate (February 23, 2012). Journal of Real Estate Finance and Economics, Vol. 44, No. 3, 2012. Available at SSRN: http://ssrn.com/abstract=2010041

Contact Information

Camilo Serrano
IAZI AG - CIFI SA ( email )
Tramstrasse 10
Zurich, CH-8050
Germany
Martin Edward Ralph Hoesli (Contact Author)
University of Geneva - Geneva School of Economics and Management (GSEM) ( email )
40 Boulevard du Pont d'Arve
Geneva 4, 1211
Switzerland
+41 22 379 8122 (Phone)
+41 22 379 8104 (Fax)
University of Aberdeen - Business School ( email )
Edward Wright Building
Dunbar Street
Aberdeen, Scotland AB24 3QY
United Kingdom
+41 22 379 8122 (Phone)
+41 22 379 8104 (Fax)
Swiss Finance Institute ( email )
24 rue du Général-Dufour
Geneva, CH - 1211
Switzerland
University of Geneva - Geneva Finance Research Institute ( email )
Geneva
Switzerland
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