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An Empirical Note on Testing the Cointegration Relationship Between the Real Estate and Stock Markets in Taiwan

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  • Tsangyao Chang

    ()
    (Department of Finance, Feng Chia University, Taichung, Taiwan)

  • Yu-Chen Wei

    ()
    (Department of Management of Science, National Chiao Tung University, Hsin-Chu, Taiwan)

  • Yang-Cheng Lu

    ()
    (Department of Finance, Ming Chuan University, Taipei, Taiwan)

Abstract

This note studies the long-run relationship between real estate and stock markets in the Taiwan context over the 1986Q3 to 2006Q4 period, using standard cointegration test of Johansen and Juselius (1990) and that of Engle-Granger (1987) as well as the fractional cointegration test of Geweke and Porter-Hudak (1983). The results from both types of cointegration tests strongly indicate that these two markets are not cointegrated with each other. With respect to risk diversification, it is obvious that investors and financial institutions should have included both assets in the same portfolio during that period.

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Bibliographic Info

Article provided by AccessEcon in its journal Economics Bulletin.

Volume (Year): 3 (2007)
Issue (Month): 45 ()
Pages: 1-11

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Handle: RePEc:ebl:ecbull:eb-07c30070

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  1. Allan w. Gregory & Bruce E. Hansen, 1992. "residual-Based Tests for Cointegration in Models with Regime Shifts," Working Papers 862, Queen's University, Department of Economics.
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  12. Cheung, Yin-Wong & Lai, Kon S, 1993. "A Fractional Cointegration Analysis of Purchasing Power Parity," Journal of Business & Economic Statistics, American Statistical Association, vol. 11(1), pages 103-12, January.
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  14. Liu, Crocker H, et al, 1990. "The Integration of the Real Estate Market and the Stock Market: Some Preliminary Evidence," The Journal of Real Estate Finance and Economics, Springer, vol. 3(3), pages 261-82, September.
  15. Johansen, Soren & Juselius, Katarina, 1990. "Maximum Likelihood Estimation and Inference on Cointegration--With Applications to the Demand for Money," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 52(2), pages 169-210, May.
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Cited by:
  1. Zeng, Jhih-Hong & Peng, Chi-Lu & Chen, Ming-Chi & Lee, Chien-Chiang, 2013. "Wealth effects on the housing markets: Do market liquidity and market states matter?," Economic Modelling, Elsevier, vol. 32(C), pages 488-495.

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