Excess Returns in the Hong Kong Commercial Property Market

Abstract

This paper examines the existence of excess returns in the commercial property market of Hong Kong using time series data for both valuations and transactions prices. The proposition is that if the valuation series is accurately processing transactions prices then excess returns, if they exist, should be detected in both series.

Our findings confirm that excess returns can be detected in both valuation and transaction based series. The excess returns are not, however, persistent although there appears to be greater opportunities for earning excess returns in the office sector.

Keywords: Excess returns, market efficiency, filter rules, Kalman filter

JEL Classification: G12, G14