Market Integration Among the US and Asian Real Estate Investment Trusts in Crisis Times

The market integration of real estate investment trusts (REITs) in the US
and four Asian markets as well as between their local stock and REIT
markets are investigated in this paper. Using a number of modern
econometric techniques on three integration indictors/proxies: timevarying conditional correlations, dynamic risk connectivity (variancecovariance) and cause and effect dependency of linear /nonlinear spillover and connectedness, we find that the five REIT markets show less integration than their corresponding stock markets. Moreover, the modelling of the portfolio risk spillover and connectedness (with covariance) shows a higher average level of market integration for the Asian REIT group. The REIT markets have experienced some
significant shifts in their net total and net-pairwise directional risk
connectivity. Additionally, investors and policymakers are reminded that
any modelling of the cause and effect dependency of the REIT markets
should be implemented with linear regression equations and a nonlinear
value at risk system in risk spillover and connectedness (with
covariance). Finally, significant contagious effects are identified across
the REIT markets and stock and REIT portfolios during the global
financial crisis and China stock market crash.