Are There Rational Bubbles in Reits? New Evidence from a Complex Systems Approach

Posted: 7 Jul 2014

See all articles by Maximilian Brauers

Maximilian Brauers

EBS Universität für Wirtschaft und Recht - EBS Business School - Real Estate Management Institute

Joachim Zietz

EBS University, EBS Business School

Date Written: June 24, 2014

Abstract

This study applies a complex systems approach to test for the presence of rational bubbles in the Equity REITs market. The applied model is based on theoretical implications of the evolution of prices under rational bubbles while they rise and to predict the most likely time of their collapse. We apply the model to daily price data on U.S. Equity REITs from 1989 to 2011. Our findings suggest the existence of a bubble for the period of 2003 to 2007. Tests for sub-markets reveal that the bubble developed in the Residential REITs market, but not in the Office REITs market.

Keywords: REITs; Rational expectation bubbles; Complex systems; LPPL model

JEL Classification: C53, G17

Suggested Citation

Brauers, Maximilian and Zietz, Joachim, Are There Rational Bubbles in Reits? New Evidence from a Complex Systems Approach (June 24, 2014). Journal of Real Estate Finance and Economics, Vol. 49, No. 2, 2014. Available at SSRN: https://ssrn.com/abstract=2458555

Maximilian Brauers

EBS Universität für Wirtschaft und Recht - EBS Business School - Real Estate Management Institute ( email )

Gustav-Stresemann-Ring 3
65189 Wiesbaden, Hessen
Germany

Joachim Zietz (Contact Author)

EBS University, EBS Business School ( email )

Gustav-Stresemann-Ring 3
Wiesbaden, Hessen 65189
Germany

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