To analyzes the impact of collapse of the U.S. real estate market on the Asia-Pacific REITs during the sample period of January 7, 2004–December 31, 2010, this paper examines co-integration, causality, and volatility spillover effects between the U.S. and Korean, Japanese, Hong Kong, Singaporean, and Australian REITs. The sample is divided into two sub-periods before and after February 7, 2007 when DJ REIT index hit a record high.
The findings indicate that Singapore, Australia, and Hong Kong REIT markets have a strong co-integration relationship regardless of the U.S. subprime mortgage crisis. Co- integration relationship between Japan and Australia and the U.S. became stronger after February 7, 2007.
The evidence shows that there is a significant Granger causality from the U.S. to Asia- Pacific REITs before and after February 7, 2007, whereas there is not from Asia-Pacific REITs to the U.S, REITs. In addition, the strong spillover effects of shock and volatility from the U.S. to Asia-Pacific REITs are found before and after February 7, 2007.