Is There Convergence Between BRICS Listed Property Stocks and International REITs?

Abstract

The BRICS market represents high-growth economies. This study empirically examines the long-run equilibrium as well as the short-run linkages between BRICS listed property stocks and REIT markets in developed countries (the United States, Australia, and the United Kingdom). We employ fractional cointegration techniques between the BRICS listed property markets and the three most developed REIT markets. We test the hypothesis of fractional integration, and our results show no evidence of cointegration between BRICS listed property markets and the REIT markets of any of the developed economies in the long run. Our results indicate only that the BRICS securitized property market is influenced by the developed economies in the short run. The implication of this study are that a portfolio of developed REIT markets are diversifiable when added into a portfolio of BRICS securitized property markets. This is particularly significant for investors and fund analysts in other to reduce portfolio risks.