Commercial Real Estate and Equity Market Bubbles: Are they Contagious to REITs?

31 Pages Posted: 6 Jun 2011 Last revised: 13 Mar 2013

See all articles by Ogonna Nneji

Ogonna Nneji

University of Reading - ICMA Centre

Chris Brooks

University of Reading - ICMA Centre

Charles W.R. Ward

University of Reading

Date Written: Septmeber 2012

Abstract

This paper uses a regime switching approach to determine whether prices in the stock, direct real estate and indirect real estate markets are driven by the presence of speculative bubbles. The results show significant evidence of the existence of periodically partially collapsing speculative bubbles in all three markets. We then develop and implement a multivariate bubble model to evaluate whether the stock and real estate bubbles spill over into REITs. We find the underlying stock market bubble to be a stronger influence on the securitized real estate market bubble than that of the property market. Furthermore, our findings suggest a transmission of speculative bubbles from the direct real estate to the stock market, although this link is not present for the returns themselves.

Keywords: periodically collapsing speculative bubbles, spillovers, contagion, REITs, real estate

JEL Classification: G12, R15, R51

Suggested Citation

Nneji, Ogonna and Brooks, Chris and Ward, Charles W.R., Commercial Real Estate and Equity Market Bubbles: Are they Contagious to REITs? (Septmeber 2012). Urban Studies, Forthcoming, Available at SSRN: https://ssrn.com/abstract=1858726 or http://dx.doi.org/10.2139/ssrn.1858726

Ogonna Nneji

University of Reading - ICMA Centre ( email )

Whiteknights Park
P.O. Box 242
Reading RG6 6BA
United Kingdom

Chris Brooks (Contact Author)

University of Reading - ICMA Centre ( email )

Whiteknights Park
P.O. Box 242
Reading RG6 6BA
United Kingdom
+44 118 931 82 39 (Phone)
+44 118 931 47 41 (Fax)

Charles W.R. Ward

University of Reading ( email )

ICMA Centre,
Henley Business School
Reading, RG6 6AB
United Kingdom
T: +44 (0)118 378 8239 (Phone)

HOME PAGE: http://www.icmacentre.ac.uk/about_us/academic_staff/professor_charles_ward,

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
238
Abstract Views
1,581
rank
145,329
PlumX Metrics