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Nonlinear adjustment of short-term deviations impacts on the US real estate market

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  • Yen-Hsien Lee
  • Chien-Liang Chiu

Abstract

This study examines whether nonlinear adjustment of short-term deviations impacts US real estate market returns by applying an exponential smooth transition threshold error-correction model with Generalized Auto Regressive Conditional Heteroscedasticity (GARCH) (ESTECM-GARCH). Empirical results demonstrate that the ESTECM-GARCH captures the dynamics of returns more effectively than the Error-Correction Model (ECM) and Exponential Smooth Transition Error-Correction Model (ESTECM). Consequently, the nonlinear behaviour of returns is driven by momentum noise traders and heterogeneous arbitrageurs in Real Estate Investment Trust (REIT) markets.

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  • Yen-Hsien Lee & Chien-Liang Chiu, 2010. "Nonlinear adjustment of short-term deviations impacts on the US real estate market," Applied Economics Letters, Taylor & Francis Journals, vol. 17(6), pages 597-603.
    • Handle: RePEc:taf:apeclt:v:17:y:2010:i:6:p:597-603
    DOI: 10.1080/13504850802167165
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    References listed on IDEAS

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    1. Nektarios Aslanidis, 2002. "Smooth Transition Regression Models in UK Stock Returns," Working Papers 0201, University of Crete, Department of Economics.
    2. Shleifer, Andrei, 2000. "Inefficient Markets: An Introduction to Behavioral Finance," OUP Catalogue, Oxford University Press, number 9780198292272.
    3. Aslanidis, Nektarios & Denise R. Osborn & Marianne Sensier, 2002. "Smooth Transition Regression Models in UK Stock Returns," Royal Economic Society Annual Conference 2002 11, Royal Economic Society.
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    Cited by:

    1. Hao Fang & Yen-Hsien Lee, 2013. "Are the Global REIT Markets Efficient by a New Approach?," Panoeconomicus, Savez ekonomista Vojvodine, Novi Sad, Serbia, vol. 60(6), pages 743-757, December.
    2. Yen-Hsien Lee & Fang Hao, 2012. "Oil and S&P 500 Markets: Evidence from the Nonlinear Model," International Journal of Economics and Financial Issues, Econjournals, vol. 2(3), pages 272-280.

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