Using the CCAPM with Stochastic Taxation and Money Supply to Examine US REITs Pricing Bubbles

摘要

We examine three issues relating to U.S. real estate investment trust (REIT) pricing. First, using a modified capital consumption asset pricing model (CCAPM) with stochastic taxation and money supply, we compute the fundamental values for REITs for our sample period, 1972-2013. Second, for publicly traded equity REITs, we define a bubble to be the difference between the actual stock market price and the fundamental value derived from our theoretical model. U.S. REITs have, among other corporate structural features, special rules governing dividend distributions and corporate taxation that make them an especially attractive and preferred vehicle for testing for the presence of pricing bubbles. Our findings suggest that during our sample period, U.S. REITs experienced many price bubbles, some of which were quite large. Third, our results imply that monetary policy, in the short run, plays a role in the formation of these pricing bubbles.