REITS TO RICHES: POCKETS OF RETURN PREDICTABILITY IN THE SINGAPORE REITS MARKET

Abstract

Contiguous periods of return predictability (‘pockets’) can be found in the Singapore REITs market, interspersed between periods of no return predictability. We first investigate the plausibility of return predictability by running tests of the implications of weak-form efficiency of the Singapore REITs market. We then use a nonparametric approach to identify such ‘pockets’, while handling the issue of persistence via IVX filtering. We proceed to produce pseudo out-of-sample forecasts and demonstrate that some predictive models outperform the prevailing mean benchmark popularized by Goyal and Welch (2008). We find that return predictability is indeed strong inside pockets (which we identify ex ante) but not outside of pockets.