PRICE SYNCHRONICITY : EVIDENCE FROM REITS IN ASIA PACIFIC MARKETS

Abstract

The previous study by Chung et al. (2010) reported high return synchronicity in equity REIT market in the United States, a result that is in contrary to theory which suggests that REITs price movements should be independent of market shocks. Since there are limited studies on the Asia Pacific REITs markets, this paper studies the behavior of return synchronicity in Asia Pacific REITs. Evidence shows that Asia Pacific REITs have generally lower average betas than those in the U.S suggesting that Asia Pacific REITs are good hedges against systematic risk. The results also show that REITs in the Asia Pacific Region have relatively low synchronicity with respect to the stock market returns. Firm size and dividend yield of REITs are two key determinants of REITs return synchronicity in the Asia Pacific context. Momentum and trading volume of REITs are not statistically significant determinants of the return synchronicity. Leverage ratio may be a significant determinant. But the effect of leverage is possibly offset by firm size since leverage is negatively and significantly correlated with log (size). Country-specific factor is also significant factors contributing to the return synchronicity, while sector-specific effects are weak except for Health-Care REITs.