Vol. 17 No. 36 (2022)

Artículos

¿Can the stock market boost economic growth? evidence from the Mexican real estate investment trust (REIT)

Published 2022-06-02 — Updated on 2022-06-02

  • Jorge Omar Razo-De-Anda
    • ,
  • Salvador Cruz-Aké
    • ,
  • Francisco Venegas-Martínez

Jorge Omar Razo-De-Anda


Salvador Cruz-Aké


Francisco Venegas-Martínez


Abstract

This paper develops a stochastic dynamic general equilibrium model to assess the impact of Real Estate Investment Trust (REIT) in the growth rate of the real estate sector through direct investment in infrastructure. Based on the theoretical relationships that the model provides we show empirical evidence, through a quantile econometric analysis of time series, of the positive impact of the REITs in the construction sector. The growth in the construction sector comes from the demand for real estate by those trusts, which would lead to a price increase, promoting gross fixed capital formation, and increasing the value of output in the construction industry.

Keywords

real estate investment trust, real estate markets, financial markets, general equilibrium

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References

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  5. Chang, F. R. (2004). Stochastic Optimization in Continuous Time. Cambridge, UK: Cambridge University Press.
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  13. Edelstein, R., & K. Magin (2013). The equity risk premium for securitized real estate: The case for us real estate investment trusts. Journal of Real Estate Research, vol. 35, No. 4, pp. 393-406.
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  28. Poo Rubio, A. M., & L. Rocha Chiu (18 de July de 2018). Evaluación de los Fideicomisos de Inversión en Bienes Raíces (REITS) como mecanismos de financiamiento en edificación. Obtenido de http://zaloamati.azc.uam.mx/handle/11191/5769.
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  30. Turnovsky, S. J. (1993). Macroeconomic policies, growth, and welfare in a stochastic economy. International Economic Review, vol. 31, No. 4, pp. 953-981.
  31. Vasicek, O. (1977). An equilibrium characterization of the term structure. Journal of financial economics, vol. 5, No. 2, pp. 177-188.
  32. Virani, S., & P. Kaur (2015). Real Estate Investment Trusts (REITs)—An Innovative Approach to Real Estate Sector. Annual Research Journal of Symbiosis Centre for Management Studies, vol. 3, pp. 155-165.
  33. Wang, C.; J. Cohen, & J. L. Glascock (23 de May de 2018). Geographically Overlapping Real Estate Assets, Liquidity Spillovers, and Liquidity Multiplier Effects. Obtenido de SSRN: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3154088.
  34. Washburn, M. (2013). How REIT Uno's offering transforms Mexico's securities market. International Financial Law Review, April 2013, NA.
  35. Yong, J., & X. Y. Zhou (1999). Stochastic controls: Hamiltonian systems and HJB equations, vol. 43. New York, USA: Springer Science & Business Media.
  36. Venegas-Martínez, F. (2008). Riesgos financieros y económicos: Productos derivados y decisiones económicas bajo incertidumbre. Cengage Learning. México.
  37. Venegas-Martínez, F. (2006). Stochastic temporary stabilization: Undiversifiable devaluation and income risks. Economic Modelling, vol. 23, No. 1, pp. 157-173.
  38. Venegas-Martínez, F. (2001). Temporary stabilization: A stochastic analysis, Journal of Economic Dynamics and Control, vol. 25, No. 9, pp. 1429-1449.
  39. Bai, Q., & L. Zhu (2017). The Effects of Industry Specific and Local Economic Factors on Credit Default Swap Spreads: Evidence from REITs. Journal of Financial Services Research, vol. 54, No. 5, pp. 1-29.
  40. Banerjee, S., & P. Basu (30 de May de 2015). National Council of Applied Economic Research. Obtenido de A dynamic stochastic general equilibrium model for India: saber.eaber.org/sites/default/files/documents/1432552897Working%20Paper%20Sheshdari%20Banerjee.pdf.
  41. Bernheim, B. D. (1989). Intergenerational altruism, dynastic equilibria and social welfare. The review of economic studies, vol. 56, No. 1, pp. 119-128.
  42. Booth, P. (2002). Real estate investment in an asset/liability modeling context. Journal of Real Estate Portfolio Management, Vol. 8, No.3 , 183-198.
  43. Chang, F. R. (2004). Stochastic Optimization in Continuous Time. Cambridge, UK: Cambridge University Press.
  44. Chiang, Y.-H.; L. Tao, & F. K. Wong (2015). Causal relationship between construction activities, employment and GDP: The case of Hong Kong. Habitat international, vol. 46, No.1, pp. 1-12.
  45. Connolly, P. (18 de July de 2018). Recent trends in the Mexican construction industry and outlook for the 21st century: Its image, employment prospects and skill requirements. Obtenido de Unpublished report for the ILO (2001): https://www.researchgate.net/profile/Priscilla_Connolly/publication/313702987_Recent_trends_in_the_Mexican_construction_industry_and_outlook_for_the_21st_Century_its_image_employment_prospects_and_skill_requirements/links/58a35fef458515d15fd9c73c/Recent-t.
  46. Cruz García, A. F. (18 de July de 2018). Private equity for real estate in Mexico: overview, challenges and opportunities. Obtenido de Diss. Massachusetts Institute of Technology: https://dspace.mit.edu/handle/1721.1/101326.
  47. Cruz-Aké, S.; R. S. García-Ruiz, & F. Venegas-Martínez (2016). Mexican REITs (REITS) in retirement funds (AFORES): different pricing approaches and market risk measurement implications. International Journal of Bonds and Derivatives, vol. 2, No.3, pp. 211-232.
  48. Dick, B.; M. Rafferty; P. Toner, & S. Wright (2017). Financialisation and labour in the Australian commercial construction industry. The Economic and Labour Relations Review, vol. 28, No. 4, pp. 500-518.
  49. Donaubauer, J.; B. E. Meyer, & P. Nunnenkamp (2016). A new global index of infrastructure: Construction, rankings and applications. The World Economy, Vol. 39, No. 2, pp. 236-259.
  50. Dubreuille, S.; M. Cherif, & M. Bellalah (2016). Real Options: An Alternative Valuation Model for the US REIT Market. International Journal of Business. vol. 21, No. 1, pp. 42-54.
  51. Edelstein, R., & K. Magin (2013). The equity risk premium for securitized real estate: The case for us real estate investment trusts. Journal of Real Estate Research, vol. 35, No. 4, pp. 393-406.
  52. Galperti, S., & B. Strulovici (2017). A theory of intergenerational altruism. Econometrica, vol. 85, No. 4, pp. 1175-1218.
  53. Greene, W. H. (2012). Econometric Analysis. USA: Prentice Hall.
  54. Kalotay, A. J.; G. O. Williams, & F. J. Fabozzi (1993). A Model for Valuing Bonds and Embedded Options. Financial Analysts Journal. CFA Institute Publications, vol. 49, No. 3, pp. 35-46.
  55. Karatzas, I., & S. Shreve (2012). Brownian motion and stochastic calculus, vol. 113. New York: Springer Science & Business Media.
  56. Kotlikoff, L. J. (2016). Essays on saving, bequests, altruism, and life-cycle planning. Massachusetts: MIT Press.
  57. Krewson-Kelly, S., & R. B. Thomas (2016). The Intelligent REIT Investor: How to Build Wealth with Real Estate Investment Trusts. Hboken, New Jersey: John Wiley & Sons, Incorporated, 2016.
  58. Le Blanc, D., & C. Lagarenne (2004). Owner-occupied housing and the composition of the household portfolio: the case of France. The Journal of Real Estate Finance and Economics, vol. 29, No. 3, pp. 259-275.
  59. Lozano Montero, E.; R. Godínez López, & S. M. Albor Guzmán (15 de July de 2018). Public-Private Associations in Mexico. Financing and Social Benefits in Road Infrastructure Projects. Obtenido de https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3100568.
  60. Merton, R. C. (1973). Theory of Rational Option Pricing. Bell Journal of Economics and Management Science. The RAND Corporation, vol. 4, No. 1, pp. 141-183.
  61. Mikosch, T. (1988). Elementary stochastic calculus, with finance in view, vol. 6. Singapore: World Scientific Publishing Company.
  62. Nasieku, T., & R. M. Wanyonyi (2016). The relationship between mortgage finance and real estate development in Kenya. Journal of Social Science Research, vol. 10, No. 1, pp. 1950-1955.
  63. Ngowi, A. B.; E. Pienaar; A. Talukhaba, & J. Mbachu (2005). The globalisation of the construction industry, a review. Building and Environment, No. 40, vol. 1, pp. 135-141.
  64. Papageorgiou, D. (30 de May de 2014). BoGGEM: No. 182. Obtenido de A dynamic stochastic general equilibrium model for policy simulations: saber.eaber.org/sites/default/files/documents/1432552897Working%20Paper%20Sheshdari%20Banerjee.pdf.
  65. Pereira, A. M., & J. B. Shoven (1988). Survey of dynamic computational general equilibrium models for tax policy evaluation. Journal of Policy modeling, vol. 10, No 3, pp. 401-436.
  66. Poo Rubio, A. M., & L. Rocha Chiu (18 de July de 2018). Evaluación de los Fideicomisos de Inversión en Bienes Raíces (REITS) como mecanismos de financiamiento en edificación. Obtenido de http://zaloamati.azc.uam.mx/handle/11191/5769.
  67. Reddy, W., & W. Wong (13 de July de 2016). Australian interest rate movements and A-REITs performance: A sectoral analysis. Obtenido de AsRES 21st International Conference. Asian Real Estate Society.
  68. Turnovsky, S. J. (1993). Macroeconomic policies, growth, and welfare in a stochastic economy. International Economic Review, vol. 31, No. 4, pp. 953-981.
  69. Vasicek, O. (1977). An equilibrium characterization of the term structure. Journal of financial economics, vol. 5, No. 2, pp. 177-188.
  70. Virani, S., & P. Kaur (2015). Real Estate Investment Trusts (REITs)—An Innovative Approach to Real Estate Sector. Annual Research Journal of Symbiosis Centre for Management Studies, vol. 3, pp. 155-165.
  71. Wang, C.; J. Cohen, & J. L. Glascock (23 de May de 2018). Geographically Overlapping Real Estate Assets, Liquidity Spillovers, and Liquidity Multiplier Effects. Obtenido de SSRN: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3154088.
  72. Washburn, M. (2013). How REIT Uno's offering transforms Mexico's securities market. International Financial Law Review, April 2013, NA.
  73. Yong, J., & X. Y. Zhou (1999). Stochastic controls: Hamiltonian systems and HJB equations, vol. 43. New York, USA: Springer Science & Business Media.
  74. Venegas-Martínez, F. (2008). Riesgos financieros y económicos: Productos derivados y decisiones económicas bajo incertidumbre. Cengage Learning. México.
  75. Venegas-Martínez, F. (2006). Stochastic temporary stabilization: Undiversifiable devaluation and income risks. Economic Modelling, vol. 23, No. 1, pp. 157-173.
  76. Venegas-Martínez, F. (2001). Temporary stabilization: A stochastic analysis, Journal of Economic Dynamics and Control, vol. 25, No. 9, pp. 1429-1449.

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