John L. Glascock

Further Evidence on the Integration of REIT, Bond, and Stock Returns

This study examines the integration of REIT, bond, and stock returns. Cointegration and vector autoregressive models are employed to explore the causality and long-run economic linkages among these securities. Our results show that REITs behave more like stocks and less like bonds after the structural changes in the early 1990s. Overall, results suggest that the benefits of diversification by including REITs in multiasset portfolios diminish after 1992.

Hazardous waste lawsuits, stockholder returns, and deterrence

For the RCRA and Superfund Acts, the publicly announced desired effects are the protection of the public and natural resources from, and ultimate cleanup of, hazardous waste materials. If the regulations are working, firms are being deterred from illegal disposal of wastes. If not, the regulations are providing only illusions of improved safety, while the public actually faces a never ending process of site discovery and cleanup. While not addressed in previous empirical literature, the deterrent effects of the RCRA and Superfund Acts are the focus of this paper. The deterrent effects of the RCRA and Superfund Acts stem from the potential for suits against responsible parties seeking an end to violations, site cleanup, and reimbursement for expenditures and damages. This paper measures the impact of hazardous waste mismanagement lawsuits on stockholder returns. Specifically, the standard event-study method is used to directly measure the abnormal losses suffered by stockholders associated with lawsuit filings and settlements between 1977 and 1986.

Firm size and the information content of bank loan announcements

Abstract We examine share price responses to announcements of bank credit agreements for exchange listed and NASDAQ firms and test whether there are systematic differences between large and small capitalization firms. For small firms both renewals and initiations of loan agreements generate significantly positive share price effects. In contrast, for large firms there is little evidence that bank credit announcements convey information to the capital market. Our results are consistent with arguments of Fama and Diamond that it is primarily small, less prestigious firms that receive benefits from screening and monitoring services associated with bank loans.

An Analysis of Office Market Rents: Some Empirical Evidence

This paper provides an empirical analysis of office building rents using data for a five‐year period in a medium‐ sized city. The results indicate that rent levels respond to various factors in the expected manner: rents vary systematically across classes of buildings and locations, overall market conditions have a significant impact on rents, and contract variations are associated with rent differences. We also present the first evidence at the building level on the rent‐vacancy adjustment process. The results show a significant relationship between rent changes and vacancies.

REIT Returns and Inflation: Perverse or Reverse Causality Effects?

Contrary to the Fisherian theory of interest, previous studies document a negative relationship between REIT (Real Estate Investment Trust) returns and inflation. In this research, we re-examine this perverse inflation behavior by testing for the causal relationships among REIT returns, real activity, monetary policy, and inflation through a vector error correction model. Our results indicate that the observations of REIT returns as perverse inflation hedges are spurious. The observed negative relationship between REIT returns and inflation is in fact a manifestation of the effects of changes in monetary policies. These findings are consistent with Darrat and Glascocks (1989) evidence of monetary effects on REIT returns.

Market Conditions, Risk, and Real Estate Portfolio Returns: Some Empirical Evidence

This research examined the return behavior of a portfolio of American and New York Stock Exchange real estate firms. A dummy variable procedure was used to test for excess return and/or change in risk behavior across market conditions. The findings were as follows. First, no excess return was found for any model specification. Second, no changes in beta were found using the benchmark approach. The beta shifted when an up market was defined as a nonrecessionary period; the beta behaved procyclically. However, the subperiod tests indicated that effect was transitory and period specific.

The Gains from Corporate Selloffs: The Case of Real Estate Assets

Recent financial economics literature has hypothesized that variations in market structure influence the distribution of gains from corporate restructuring between buyers and sellers. We test this hypothesis using data on restructuring involving real estate assets by isolating the effects depending on multiple versus single bidders, acquisition frequency and transaction type. While we find gains for both buyers and sellers, the buyers gain only when they make few purchases. Those firms pursuing an acquisition strategy show no gains around the specific acquisition announcements. Additionally, both buyers and sellers are more likely to have a positive reaction to the announcement when the transaction is property rather than a division or subsidiary. Copyright American Real Estate and Urban Economics Association.

Real Estate Returns, Money and Fiscal Deficits: Is the Real Estate Market Efficient?

This research examines the causal relationship between several financial variables and a portfolio of real estate returns using monthly data from January 1965 to December 1986. The empirical analysis is based on multivariate Granger-causality tests in conjunction with Akaikes final prediction error criterion. The results indicate that measures approximating monetary policy and market returns play an important role in causing changes in real estate returns. In particular, our findings suggest that base money and market returns have had significant lagged effects on current real estate returns.

Signaling with Convertible Debt

We test whether the conversion price (ratio) is viewed by the stock market as a credible signal of the firms future earnings prospects (Kim (1990)) and, subsequently, whether convertible debt serves as backdoor equity financing (Stein (1992)). Examining the conversion price in relation to current stock prices and a priori growth expectations produces an average expected time of less than 1.5 years for convertible bonds to be at-the-money. Thus, as Stein suggests, convertibles appear to be a method of drawing equity into a firms capital structure. We also find that the size of the firms announcement period abnormal returns is positively related to the expected time for the convertible to become at-the-money. Given these relationships, we conclude that convertible debt issue announcements, on average, send an equity-like signal to the market.

Stock Market Linkages Before and After the Asian Financial Crisis: Evidence from Three Greater China Economic Area Stock Markets and the US

We investigate the stock market linkages between the United States and three Greater China Economic Area stock markets — China, Hong Kong, and Taiwan, before and after the 1997 Asian financial crisis. Daily stock market indices from January 1995 to December 2000 are used for the analysis. Results from Granger causality test indicate increased feedback relationships between the markets in the post-crisis period. We also find, from the principal component analysis, fewer common factors affecting stock returns after the crisis, suggesting more harmonious market co-movements after the financial crisis. Additionally, results from a variance decomposition analysis suggest that stock markets are more responsive to foreign shocks after the crisis. This further strengthens the evidence that stock markets become more interrelated after the 1997 Asian financial crisis.