Substitutability between Equity Reits and Mortgage Reits

20 Pages Posted: 4 Jan 2007

See all articles by Ming-Long Lee

Ming-Long Lee

National Yunlin University of Science and Technology

Kevin C.H. Chiang

University of Alaska Fairbanks - School of Management (SOM); Louisiana State University, Baton Rouge - Department of Finance

Abstract

This study extends Seck's (1996) approach to investigate the degree of substitutability between equity real estate investment trusts (EREITs) and mortgage real estate investment trusts (MREITs). The variance ratio test and the variance decomposition of forecast errors yield results indicating the existence of informational commonality between EREITs and MREITs. The findings indicate that the two types of REITs are substitutable. A direct implication is that investors who believe they have superior forecasting ability will be indifferent to invest in either type of REIT. Another implication is that REITs can be treated as a single asset class in constructing a diversified multi-asset portfolio.

Keywords: equity, real estate investment trust, EREIT. mortgage, MREIT

JEL Classification: C12,C15,C31,C35, C51-53,D81,E27,G11,G12,G13,G14

Suggested Citation

Lee, Ming-Long and Chiang, Kevin C.H., Substitutability between Equity Reits and Mortgage Reits. Journal of Real Estate Research, Vol. 26, No. 1, 2004, Available at SSRN: https://ssrn.com/abstract=954790

Ming-Long Lee (Contact Author)

National Yunlin University of Science and Technology ( email )

123, University Rd. Sec 3
Touliu, Youlin 640, Yunlin 64002
Taiwan

Kevin C.H. Chiang

University of Alaska Fairbanks - School of Management (SOM) ( email )

P.O. Box 756080
208C Bunnell Building
Fairbanks, AK 99775-0500
United States
907-474-7049 (Phone)
907-474-5219 (Fax)

Louisiana State University, Baton Rouge - Department of Finance ( email )

E.J. Ourso College of Business Administration
Baton Rouge, LA 70803
United States
225-753-4978 (Phone)
225-388-6366 (Fax)

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