Market Efficiency and Return Statistics: Evidence from Real Estate and Stock Markets Using a Present-Value Approach

33 Pages Posted: 19 Jul 2000

See all articles by Lilian Ng

Lilian Ng

Schulich School of Business, York University; European Corporate Governance Institute (ECGI)

Yuming Fu

National University of Singapore

Date Written: April 2000

Abstract

This paper develops a methodology to identify asset price response to news in the framework of Campbell-Shiller log-linear present-value equation. We show that slow price adjustment not only induces high serial auto correlation in real estate excess returns, but also dampens their volatility and correlation with other asset returns. Using Hong Kong real estate and stock market data, we find that the quarterly real estate price assimilates only about half the effect of market news, whereas the quarterly stock price incorporates the news fully. Our analysis identifies a cumulative price adjustment that recovers lost information in real estate returns due to market inefficiency and thereby restores real estate return volatility and correlation with the stock market.

JEL Classification: G12, G14

Suggested Citation

Ng, Lilian and Fu, Yuming, Market Efficiency and Return Statistics: Evidence from Real Estate and Stock Markets Using a Present-Value Approach (April 2000). Available at SSRN: https://ssrn.com/abstract=231092 or http://dx.doi.org/10.2139/ssrn.231092

Lilian Ng (Contact Author)

Schulich School of Business, York University ( email )

N223, Seymour Schulich Building
4700 Keele Street
Toronto, Ontario ON M3J 1P3
Canada
+1.416.736.2100 x77994 (Phone)

European Corporate Governance Institute (ECGI) ( email )

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels
Belgium

Yuming Fu

National University of Singapore ( email )

4 Architecture Drive
Department of Real Estate
Singapore, 117566
Singapore
(65) 6874 7100 (Phone)
(65) 6774 8684 (Fax)

HOME PAGE: http://profile.nus.edu.sg/sde/rstfuym

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