Anti-persistence and long-memory behaviour of SAREITs
| DOI | https://doi.org/10.1108/JPIF-09-2016-0073 |
| Published date | 03 July 2017 |
| Date | 03 July 2017 |
| Pages | 356-368 |
| Author | Kolawole Ijasan,George Tweneboah,Jones Odei Mensah |
| Subject Matter | Property management & built environment,Real estate & property,Property valuation & finance |
Anti-persistence and long-memory
behaviour of SAREITs
Kolawole Ijasan
School of Construction Economics and Management,
University of the Witwatersrand, Johannesburg, South Africa
George Tweneboah
School of Business Administration,
Ghana Baptist University College, Kumasi, Ghana, and
Jones Odei Mensah
Wits Business School, University of the Witwatersrand,
Johannesburg, South Africa
Abstract
Purpose –The purpose of this paper is to provide empirical evidence on the long-memory behaviour of
South African real estate investment trusts (SAREITs).
Design/methodology/approach –The study employs a battery of advanced techniques to examine the
behaviour of returns of 29 SAREIT equities listed on the Johannesburg Stock Exchange. The authors
analysed daily closing prices covering different periods up to 21 May 2016. The results provide support for
long memory in majority of SAREIT returns.
Findings –The finding of negative fractional integration parameters provides evidence of anti-persistence in
SAREIT returns.
Practical implications –It is recommended that the regulatory authorities adopt technologies that allow a
more effective, faster means to disseminate information, and improve the electronic trading mechanism that
facilitates quicker price adjustment to news entering the market.
Originality/value –The paper determines the fractional differencing (long-memory) parameter for
SAREITs and adds value to the existing body of knowledge.
Keywords Long memory, ARFIMA, Anti-persistence, JSE, SAREITs, Short memory
Paper type Research paper
1. Introduction
Since the proposition of the theory of random walk by Kendall and Hill (1953) and the
efficient market hypothesis (EMH) championed by Fama (1965, 1970), many researchers
have applied it to model the behaviour of asset prices and their returns. Simply put, the
random walk hypothesis (RWH hereafter) suggests that stock prices are independent of
each other and their distributions remain unchanged over long lags. As depicted by Kendall
and Hill (1953), stock prices have seemed so unpredictable (Brealey et al., 2014). The validity
of this claim supposes that the EMH is valid. However, contemporary research has
documented some evidence of long memory (or low frequency) in stock returns albeit with
mixed conclusions.
Earlier studies by Fama and French (1988) and Robinson (2003) showed evidence of long
memory[1], whereas other researchers oppose this assertion. Many authors have performed
comprehensive comparisons of past research (see Coakley et al., 2011; Henry, 2002 (stocks)).
The existing body of work shows among others that the reason for the inconsistence and
differences in findings depends on the country in focus (economic situation), asset class
(e.g. stocks, currencies, spot commodities, etc.), and methodology (for instance, rescaled,
long memory, Autoregressive Conditional Heteroskedasticity, etc.) employed.
In relation to real estate investment trusts (REITs), the evidence of price persistence or
long memory is equally as varied as it is in the mainstream stock prices research. However,
Journal of Property Investment &
Finance
Vol. 35 No. 4, 2017
pp. 356-368
© Emerald PublishingLimited
1463-578X
DOI 10.1108/JPIF-09-2016-0073
Received 27 September 2016
Revised 5 December 2016
Accepted 14 January 2017
The current issue and full text archive of this journal is available on Emerald Insight at:
www.emeraldinsight.com/1463-578X.htm
356
JPIF
35,4
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