Title: Cointegration and adjustment dynamics of REIT and stock markets during the global financial and European debt crises

Authors: Umit Erol; Aydin Yuksel; Asli Yuksel; Hakki Ozturk

Addresses: Department of Economics and Finance, Faculty of Economics, Administrative and Social Sciences, Bahcesehir University, Ciragan Caddesi, No. 4, Besiktas, Istanbul, Turkey ' Department of Management, Faculty of Economics and Administrative Sciences, Isik University, Mesrutiyet Mahallesi, Universite Sokak, No. 2, Sile, Istanbul, Turkey ' Department of Economics and Finance, Faculty of Economics, Administrative and Social Sciences, Bahcesehir University, Ciragan Caddesi, No. 4, Besiktas, Istanbul, Turkey ' Department of International Finance, Faculty of Economics, Administrative and Social Sciences, Bahcesehir University, Ciragan Caddesi, No. 4, Besiktas, Istanbul, Turkey

Abstract: This paper analyses the cointegration relationship between the REIT and stock markets of ten developed countries during the 2005-2013 period, which is characterised by the global financial and the European debt crises. Given the structural breaks in the data, the effect of these two crises is examined separately by dividing the sample period into four equal parts and by using M-TAR cointegration analysis. The results suggest that the cointegration between the stock and REIT markets was not a globally observed feature prior to the twin crises. The strong and globally valid cointegration observed after 2007 was due to the common negative response of both markets to the unexpected massive shocks. These shocks also led to bilateral causality and strong feedback effects between these two markets, thus strictly limiting the diversification benefits of the REIT market during the crisis period.

Keywords: real estate investment trust; REIT; stock market; cointegration; crisis.

DOI: 10.1504/GBER.2020.108393

Global Business and Economics Review, 2020 Vol.23 No.1, pp.23 - 49

Received: 23 Jun 2018
Accepted: 17 Aug 2018
Published online: 13 Jul 2020 *

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