Cointegration and Price Discovery between Equity and Mortgage REITs

This study analyzes the relationship between equity and mortgage real estate investment trust (REIT) stock prices by performing cointegration tests and causality tests, and estimating an error correction model. Evidence is found that a stable long-run linear relationship exists based on their common reactions to changes in market returns, interest rates and other additional factors. Geweke causality test results indicate a causal relationship running from EREIT stock prices to MREIT stock prices. This may reflect the quicker response of equity REIT stock prices to changes including real estate returns. In addition, the results suggest overall linear dependence (total linear causality) and instantaneous linear feedback between changes in EREIT and MREIT stock prices. The results of the error correction model not only indicate a significant increase in the explanatory power of the model compared with the vector autoregression model but also reveals how the price discovery processes in REIT security markets maintain long-run equilibrium.

Instability Of Risk Loadings Of Industrial Stocks

By using the Flexible Least Squares (FLS) method, this study visibly shows the time variation paths of risk loadings for industrial stocks. Significant structural changes in time variation paths of risk loadings are verified by the OLS results and largely consistent with major economic and political events in the U.S. history

Interest Rate Sensitivities of REIT Returns

In order to identify effective interest rate proxies for equity and mortgage REITs, this study analyzes seven different interest rate proxies that have been widely used in the REIT literature. They are the monthly holding period returns on long-term U.S. government bonds and high-grade corporate bonds, the percentage changes in yields for long-term U.S. government bonds and high-yield (Baa) corporate bonds, the difference between returns on long-term U.S. government bonds and T-bill rates, the spread between yields on high-yield (Baa) corporate bonds and returns on long-term U.S. government bonds, and the spread between returns on high-grade corporate bonds and returns on long-term U.S. government bonds. The overall OLS results suggest that mortgage REITs are sensitive to all proxies, while equity REITs are significantly affected by only changes in yields on long-term U.S. government bonds and high-yield corporate bonds. The time variation paths for sensitivities indicate that all interest rate sensitivities are time specific. Overall, the changes in yields on high-yield corporate bonds (Baa) has the strongest explanatory power for returns of equity and mortgage REITs for most of the 27-year sample period (1972 through 1998).

The Sensitivity of Bank Stocks to Mortgage Portfolio Composition

Previous studies have found that bank stock returns are very sensitive to changes in real estate returns in general. But how the composition and quality of bank real estate portfolios affect the sensitivity of bank stocks to real estate returns has not been rigorously examined. The purpose of this study is to empirically examine this important question. The results indicate that commercial mortgages contribute the most to the sensitivity of bank stock returns. Farmland loans have a negative impact on bank real estate return sensitivity. Thus, farmland loans could play a diversification role in terms of reducing the sensitivity of banks to real estate returns, if used appropriately.

The Wealth Effects of Domestic vs International Joint Ventures: The Case of Real Estate

This study examines the wealth effect of international versus domestic real estate joint ventures on the U.S. participating firm's shareholders. This is done using traditional even study methodology for real estate joint venture announcements. The results suggest that domestic real estate joint ventures generally result in a significant increase in the firm's value, while international real estate joint ventures usually have a much less significant to nonsignificant wealth impact. This may be due to the immovability of real properties in foreign countries and the large amount of initial investment in real estate that increase both political and economic risks for international real estate joint ventures. This study also finds that hotel joint ventures generally have a weaker wealth effect than non-hotel real estate joint ventures.

DO INVESTOR CLIENTELES HAVE A DIFFERENTIAL IMPACT ON PRICE AND VOLATILITY? THE CASE OF BERKSHIRE HATHAWAY

The purpose of this research is to determine whether investor clienteles react in a different manner to the same information. Applying a technique developed by He (2012) to a firm like Berkshire Hathaway with two different classes of common stock allows us to test whether investor clienteles react in differential ways to the same information while holding other factors constant. Using a method developed by He (2012) we create an investor sentiment index (SE) to forecast prices of Berkshire Hathaway class A and class B shares. We find evidence that reactions of class A shareholders to news are more volatile, compared with class B. There is no evidence that volatility of SE can significantly affect the accuracy of forecasting. However, results of this study suggest that a more volatile SE index may lead to more unsteady outcomes in some rolling forecasts. The volatility differences in SE index and rolling forecasts stem from differential investor clienteles and their reactions the same news

A NOTE ON THE EFFECTS OF PREPAYMENT RISK ON MORTGAGE COMPANIES AND MORTGAGE REITs

The purpose of this paper is to determine whether prepayment risk impacts the performance of mortgage companies and/or mortgage REITs. Previous research finds prepayment risk impacts bank returns and also impacts bank loan returns (He, 2007; Fayman & He, 2011). This paper uses regression analysis to measure the prepayment risk premium and then uses those results as a dependent variable in several separate regression models that utilize performance metrics as the independent variable. The results indicate that prepayment risk has a positive impact on sales growth in mortgage companies and also has a negative impact on ROE and a positive impact on ROA in mortgage companies. One possible explanation for this finding is mortgage companies may opt to sell mortgages faster in interest rate environments that have higher levels of prepayment risk. However, prepayment risk appears to have little to no impact on the performance of mortgage REITs

Quantum Helicity Entropy of Moving Bodies

Lorentz transformation of the reduced helicity density matrix for a massive spin 1/2 particle is investigated in the framework of relativistic quantum information theory for the first time. The corresponding helicity entropy is calculated, which shows no invariant meaning as that of spin. The variation of the helicity entropy with the relative speed of motion of inertial observers, however, differs significantly from that of spin due to their distinct transformation behaviors under the action of Lorentz group. This novel and odd behavior unique to the helicity may be readily detected by high energy physics experiments. The underlying physical explanations are also discussed.Comment: version to appear in Journal of Physics A as a Fast Track Communicatio

Reconstructing Tonian seawater ⁸⁷Sr/⁸⁶Sr using calcite microspar

The Tonian Period followed a long interval of relative stasis and led into the climatic extremes and biological radiations of multicellular life during the Cryogenian and Ediacaran Periods, respectively. However, despite its pivotal situation, it remains relatively understudied, in large part due to the lack of robust age constraints. A combination of fossil evidence, radiometric ages, and isotopic constraints reveal that carbonate strata on the North China craton were deposited between ca. 980 and ca. 920 Ma, thereby filling a gap in marine archives. Here we present 87Sr/86Sr data from selected calcite microspar cements, which filled early diagenetic “molar tooth” cracks, along with data from demonstrably well-preserved bulk carbonate samples. These new data show that seawater 87Sr/87Sr rose in stages from ~0.7052 at ca. 980 Ma to ~0.7063 by ca. 920 Ma, after which a return to low values coincided with the eruption of the Dashigou large igneous province across the North China craton. We also present a new Neoproterozoic seawater 87Sr/86Sr curve, which reveals that the general trend toward higher 87Sr/87Sr during the Tonian Period was checked repeatedly by the input of less-radiogenic strontium from a series of eruptive events, both coincident with and prior to the main breakup of Rodinia. The weathering of Tonian volcanic provinces has been linked to higher carbon burial, glaciation, and oxygenation due to the high phosphorus content of flood basalts. Here we show that the weathering of major volcanic provinces affected material fluxes and ocean chemistry much earlier than previously envisaged

Stationary State Solutions of a Bond Diluted Kinetic Ising Model: An Effective-Field Theory Analysis

We have examined the stationary state solutions of a bond diluted kinetic Ising model under a time dependent oscillating magnetic field within the effective-field theory (EFT) for a honeycomb lattice $(q=3)$. Time evolution of the system has been modeled with a formalism of master equation. The effects of the bond dilution, as well as the frequency $(\omega)$ and amplitude $(h/J)$ of the external field on the dynamic phase diagrams have been discussed in detail. We have found that the system exhibits the first order phase transition with a dynamic tricritical point (DTCP) at low temperature and high amplitude regions, in contrast to the previously published results for the pure case \cite{Ling}. Bond dilution process on the kinetic Ising model gives rise to a number of interesting and unusual phenomena such as reentrant phenomena and has a tendency to destruct the first-order transitions and the DTCP. Moreover, we have investigated the variation of the bond percolation threshold as functions of the amplitude and frequency of the oscillating field.Comment: 8 pages, 4 figure