Speculative Bubbles, Financial Crises and Convergence in Global Real Estate Investment Trusts

24 Pages Posted: 7 Aug 2013

See all articles by Roselyne Joyeux

Roselyne Joyeux

Macquarie University - Department of Economics; Financial Research Network (FIRN); Macquarie University, Macquarie Business School

George Milunovich

Macquarie University - Department of Economics; Macquarie University, Macquarie Business School

Date Written: June 28, 2013

Abstract

We test for price bubbles in fourteen national REIT markets and examine the extent of convergence toward a common trend between the REITs of these countries. Our methodology consists of the recently developed test of Phillips, Shi and Yu (2012) for mildly explosive processes, and the Phillips and Sul (2007) method for modelling convergence between random variables. We find evidence of explosive behaviour in index levels of eleven of the fourteen markets. In contrast explosive dynamics are found in only four of the fourteen price/dividend ratios, suggesting that the explosive behaviours found may be due to the explosive nature of the dividends. All of the episodes of explosive behaviour, with the exception of Japan, are date-stamped to periods prior to the 2007-2009 financial crisis. Testing for convergence between the REIT indices and price/dividend ratios we find a number of periods over which the markets converge towards a common trend. Interestingly, all of the convergence intervals coincide with either periods of crises, or periods of market exuberance (bubbles). For instance, the crises periods correspond with the 2000 dot-com crash, the 2007-2009 crisis period and the 2010-2013 European sovereign debt crisis suggesting that increases in REIT comovements occur during intervals of financial turbulence, and lending support for the contagion hypothesis. The bubble periods of 2004-2005 are also associated with convergence towards a common trend in the EU markets.

Keywords: Real Estate Investment Trusts, REITs, Financial Crisis, Financial Contagion, Convergence, Price Bubbles

JEL Classification: G15, F36, C22, C32

Suggested Citation

Joyeux, Roselyne and Milunovich, George, Speculative Bubbles, Financial Crises and Convergence in Global Real Estate Investment Trusts (June 28, 2013). Available at SSRN: https://ssrn.com/abstract=2306780 or http://dx.doi.org/10.2139/ssrn.2306780

Roselyne Joyeux

Macquarie University - Department of Economics ( email )

Sydney NSW 2109
Australia

Financial Research Network (FIRN)

C/- University of Queensland Business School
St Lucia 4071 Brisbane
Queensland
Australia

HOME PAGE: http://www.firn.org.au

Macquarie University, Macquarie Business School ( email )

New South Wales 2109
Australia

George Milunovich (Contact Author)

Macquarie University - Department of Economics ( email )

Sydney NSW 2109
Australia

Macquarie University, Macquarie Business School ( email )

New South Wales 2109
Australia

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
152
Abstract Views
955
rank
210,806
PlumX Metrics