Abstract
This study tests for the presence of Evans’ (1991) periodically collapsing bubbles in four real estate investment trust (REIT) classifications in the US by employing the momentum threshold autoregressive (MTAR) model and the MTAR model with smooth transition in trend (i.e., the LNV-MTAR model). By taking into account asymmetries in departures from the long-run equilibrium relationship, the MTAR technique is designed to empirically capture the characteristics of periodically collapsing bubbles. The results of the linear unit root test show evidence of rational bubbles, but the results of the MTAR test are mixed in the US REIT markets. The results of the LNV-MTAR test show that periodically collapsing bubbles do not hold in the US REIT markets provided that a structural shift in trend is allowed.
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