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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. Shleifer, Andrei, 2000. "Inefficient Markets: An Introduction to Behavioral Finance," OUP Catalogue, Oxford University Press, number 9780198292272.
    2. 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.
    3. Nektarios Aslanidis, 2002. "Smooth Transition Regression Models in UK Stock Returns," Working Papers 0201, University of Crete, Department of Economics.
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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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