Securitized real estate , weak-form market efficiency , random walk hypothesis , variance ratio tests , runs test , trading strategies
Abstract:
This paper conducts tests of the random walk hypothesis and market efficiency for 14 national public real estate markets. Random walk properties of equity prices influence the return dynamics and determine the trading strategies of investors. To examine the stochastic properties of local real estate index returns and to test the hypothesis that public real estate stock prices follow a random walk, the single variance ratio tests of Lo and MacKinlay (1988) as well as the multiple variance ratio test of Chow and Denning (1993) are employed. Weak-form market efficiency is tested directly using non-parametric runs tests. Empirical evidence shows that weekly stock prices in major securitized real estate markets do not follow a random walk. The empirical findings of return predictability suggest that investors might be able to develop trading strategies allowing them to earn excess returns compared to a buy-and-hold strategy.
Zusätzliche Informationen:
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