An Empirical Analysis Of Real Estate Investment Trusts Return And Common Stock Return In The United States,South Korea And Hong Kong Market Using Cointegration Technique

This paper analyzes the relationship between common stocks and equity REITs in the United States,South Korea and Hong Kong market.This paper investigates whether the equity REITs return and common stocks return tend to move in relation to each other.Also this paper examines how much impact the common stocks return has on the performance of equity REITs return.This paper utilizes the daily return data of REITs and common stocks from three markets for the period from January 2004 to December 2014.This paper employs a variety of analytical tools including correlation analysis,Johansen and Juselius cointegration,granger causality test,Vector Error Correction Model(VECM)and impulse response function.Using granger causality test,the result shows that U.S.REIT returns can help predict S&P 500 returns.Since there is the presence of bidirectional causal relationship between KREIT returns and KOSPI returns,not KREIT returns can also help predict KOSPI returns,but KOSPI returns can also help predict KREIT returns.Besides,HKREIT returns can help predict KOSPI returns.S&P 500 returns can help predict KOSPI returns.U.S.REIT returns can help predict HKREIT returns.U.S.REIT returns can help predict Hang Seng Index returns.All others are no granger causality.Moreover,VECM investigates whether the long run or short run equilibrium relationship between REITs returns and common stock returns among the markets.The result displays there is long run equilibrium relationship from the S&P500 returns and Hang Seng Index returns to U.S.REIT returns,and there is short run equilibrium relationship from KOSPI returns,KREIT returns,and HKREIT returns to U.S.REIT returns.Also,there is long run equilibrium relationship from U.S.REIT returns and Hang Seng Index returns to KREIT returns and there is short run equilibrium relationship from KOSPI returns,S&P500 returns and HKREIT returns to KREIT returns.Furthermore,there is short run equilibrium relationship from S&P 500 returns and Hang Seng Index returns to HKREIT returns,however,there is long run equilibrium relationship from U.S.REIT returns and KREIT returns to HKREIT returns and there is no short run equilibrium relationship from KOSPI returns to HKREIT returns.