Response speeds of direct and securitized real estate to shocks in the fundamentals

(2010), the overall TBI total return index was substantially below the long-run relation
between the TBI and NAREIT indices in 1994, while the TBI index was clearly above the
relationship in 2008; thus the observed outperformance of TBI returns over the period.
Oikarinen et al. relate the relatively high REIT prices in the mid 1990s to the “REIT boom”
and the relatively low REIT price level in 2008 to the substantially faster reaction of the REIT
market to the financial crisis. Moreover, some of our results suggest flight-to-safety from
more risky assets to direct real estate during times of growing risk aversion and uncertainty.
This indicates that any financial crisis is likely to hit REIT prices harder that direct prices. In
consequence, we concentrate on the short-run dynamics and we do not deal with the potential
long-run relationships between the securitized and direct markets in this study.

[Table 1 here]
[Fig. 1 here]

Contemporaneous quarterly correlations between the returns are reported in Table 2.
Interestingly, the correlations between the TBI and REIT returns within the same property
type are relatively weak - the correlation figures are notably greater between different TBI
sectors and, in the case of apt_tbi and ind_tbi, even between TBI returns and REIT returns for
other sectors. This may be due to the potential lead-lag relations of the TBI and REIT returns
within the same sector, since a lead-lag relationship may notably diminish the observed short-
run correlations between asset returns. Table 2 also reveals that co-movement between
various REIT indices is greater than that between the sector level TBI indices at the quarterly
frequency.

[Table 2 here]

<<   8   9   10   11   12   13   14   >>

More intriguing information