Comovements of Korea REITs/Real Estate Funds and U.S. REITs before and after 2007-2008 Global Financial Crisis

Kim， Bum-Suk

Korea Real Estate Review

2010, 20(1), pp.115-137
Publisher : korea real estate research institute
Research Area : Law of Real Estate

Kim， Bum-Suk ¹

¹극동대학교

ABSTRACT

This paper examines comovements of Korean REITs and Real Estate Funds - Macquarie Central CR REITs, Kocref 7, Kocref 8, and Macquarie Infrastructure Fund - and U.S. REIT index. before and after 2007-2008 global financial crisis. Global economies as well as real estate markets had suffered due to the global financial crisis caused by the U.S. subprime mortgage defaults. This study found that, n the long term, there is no strong co-integration between Korean REITs, Real Estate Funds and Dow Jones U.S. selected REITs, Dow Jones Industrial Average. Kocref 7 and Kocref 8, however, had co-integration with Dow Jones U.S. selected REITs, Dow Jones Industrial Average. before the crisis. Granger causality tests show that Dow Jones U.S. selected REITs, Dow Jones Industrial Average affect Kocref 7, Kocref 8, and Macquarie Infrastructure Fund. in the short term. Such impact get stronger after the global financial crisis. In short, in the short term, Korean REITs and Real Estate Funds are affected by the U.S. real estate and stock markets. But in the long-term, Korean REITs and Real Estate Funds do not move together with the U.S. real estate and stock markets. This results indicate that Korean REITs and Real Estate Funds can be useful tools for international diversification.
KEYWORDS

Global Financial Crisis, REITs, Unit Root Tests, Co-integration Tests, Vector Error Correcton Model
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