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Testing for Periodically Collapsing Rational Speculative Bubbles in U.S. REITs

Author

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  • Keith Anderson
  • Chris Brooks
  • Sotiris Tsolacos
Abstract
Executive Summary. This paper is the first to utilize a direct test for periodic, partially collapsing speculative bubbles in real estate investment trust (REIT) prices in the United States. A long history of data is employed for the All, Mortgage, Hybrid, and Equity REIT categories. This approach is more powerful than existing tests and some support is found for the presence of speculative bubbles. Time-varying probabilities are computed for being in the surviving and collapsing regimes. The paper shows how this information could be used in developing a signal to inform investors' decisions on timing a market exit, thereby shielding their portfolios from the effects of periodically bursting bubbles or indeed taking advantage of such bubbles to both increase returns and reduce risk.

Suggested Citation

  • Keith Anderson & Chris Brooks & Sotiris Tsolacos, 2011. "Testing for Periodically Collapsing Rational Speculative Bubbles in U.S. REITs," Journal of Real Estate Portfolio Management, Taylor & Francis Journals, vol. 17(3), pages 227-241, January.
    • Handle: RePEc:taf:repmxx:v:17:y:2011:i:3:p:227-241
    DOI: 10.1080/10835547.2011.12089906
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    More about this item

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G17 - Financial Economics - - General Financial Markets - - - Financial Forecasting and Simulation

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