Relationship and Lead-Lag Effect Between Asian Real Estate

Relationship and Lead-Lag Effect Between Asian Real Estate...

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Relationship and Lead-Lag Effect Between Asian Real Estate Investment Trusts (REITs) Performance and Malaysian REIT Market: Cointegration Modelling Abdul Hadi Nawawi 1 , Anuar Husin 2 , Abdul Razak Abdul Hadi 3 and Mohamed Hisham Yahya 4 1 Faculty of Architecture, Planning and Surveying, Universiti Teknologi MARA, 40450 Shah Alam, MALAYSIA 2 Faculty of Architecture, Planning and Surveying, Universiti Teknologi MARA, 40450 Shah Alam, MALAYSIA 3 International School of Entrepreneurship, Universiti Kuala Lumpur, Jalan Sultan Ismail, Kuala Lumpur, MALAYSIA 4 International School of Entrepreneurship, Universiti Kuala Lumpur, Jalan Sultan Ismail, Kuala Lumpur, MALAYSIA Email address of corresponding author:hadinawawi@yahoo.com Abstract Against a plethora of justifications on the importance of work on the relationship between investment instruments in different markets context, there is still gap of knowledge on the relationship between a regional Real Estate Investment Trusts (REITs) market and a particular REIT of a country. This study is pursued with the objective of revealing the relationship between two markets, namely the Malaysian REIT and the Asian REITs market. This was investigated using monthly data from March 2005 until September 2009. Japan and Singapore are chosen to represent the Asian REITs because the two dominate the Asian REIT market in terms of market capitalization. The study employs Engle-Granger Cointegration test to examine the variables’ long-run relationship, while vector autoregression (VAR) is deployed to explore the variables’ dynamic interactions. The empirical findings of the study show an absence of long-run relationship between Malaysian REIT market and the Asian REITs market. With regard to their dynamic interactions, the two markets are found to be positively correlated and short-term relationship can be established between them. The Malaysian REIT is found to be lagging against the Asian REITs for up to two months. Keywords: REITs performance, REIT market, cointegration modeling 1. Introduction Investment in securitized real estate is frequently considered as an instrument for participating in the long run development of the real estate market without suffering from its typical disadvantage that is its illiquidity. Over the last 50 years, Real Estate Investment Trusts (REITs) have been growing all over the world and plays an important role in helping investors to invest their money in indirect real estate investments. In recent years, real estate investors are becoming more interested in investment opportunities outside their own counties or regions. Among these opportunities, real estate stocks are gaining ground. In Asia, listed property companies make a significant contribution to the market capitalization of Asian stock markets (Newell and Chau, 2005; Steinert and Crowe, 2001).
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This note was uploaded on 10/09/2011 for the course 323 3232 taught by Professor 3232 during the Spring '11 term at Apex College.

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Relationship and Lead-Lag Effect Between Asian Real Estate...

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