IDEAS home Printed from https://ideas.repec.org/a/eee/finlet/v20y2017icp217-222.html
   My bibliography  Save this article

Wealth effect revisited: Novel evidence on long term co-memories between real estate and stock markets

Author

Listed:
  • Kiohos, Apostolos
  • Babalos, Vassilios
  • Koulakiotis, Athanasios

Abstract

Employing an innovative ECM-ARFIMA methodology, we set out to explore the dynamic interdependence of stock and securitized real estate markets for two developed western economies that exhibit different characteristics. The empirical analysis ran from 2/1/1990 to 13/06/2014. Our results provide support to the ‘wealth effect’ and to the fractional integration process in both countries. It is clear that non-linear co-integration, co-memory, long-run and short-run adjustment dynamics are fundamental concepts in understanding market integration/segmentation. Our findings entail significant implications for policymakers, market regulators and investors.

Suggested Citation

  • Kiohos, Apostolos & Babalos, Vassilios & Koulakiotis, Athanasios, 2017. "Wealth effect revisited: Novel evidence on long term co-memories between real estate and stock markets," Finance Research Letters, Elsevier, vol. 20(C), pages 217-222.
    • Handle: RePEc:eee:finlet:v:20:y:2017:i:c:p:217-222
    DOI: 10.1016/j.frl.2016.10.002
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S1544612316301921
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.frl.2016.10.002?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Brunetti, Celso & Gilbert, Christopher L., 2000. "Bivariate FIGARCH and fractional cointegration," Journal of Empirical Finance, Elsevier, vol. 7(5), pages 509-530, December.
    2. John Okunev & Patrick J. Wilson, 1997. "Using Nonlinear Tests to Examine Integration Between Real Estate and Stock Markets," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 25(3), pages 487-503, September.
    3. Elaine Worzala & C.F. Sirmans, 2003. "Investing in International Real Estate Stocks: A Review of the Literature," Urban Studies, Urban Studies Journal Limited, vol. 40(5-6), pages 1115-1149, May.
    4. Li, Xiao-Lin & Chang, Tsangyao & Miller, Stephen M. & Balcilar, Mehmet & Gupta, Rangan, 2015. "The co-movement and causality between the U.S. housing and stock markets in the time and frequency domains," International Review of Economics & Finance, Elsevier, vol. 38(C), pages 220-233.
    5. Kim Liow & Haishan Yang, 2005. "Long-Term Co-Memories and Short-Run Adjustment: Securitized Real Estate and Stock Markets," The Journal of Real Estate Finance and Economics, Springer, vol. 31(3), pages 283-300, November.
    6. Xue, Yi & He, Yin & Shao, Xinjian, 2012. "Butterfly effect: The US real estate market downturn and the Asian recession," Finance Research Letters, Elsevier, vol. 9(2), pages 92-102.
    7. Panayotis Kapopoulos & Fotios Siokis, 2005. "Stock and real estate prices in Greece: wealth versus 'credit-price' effect," Applied Economics Letters, Taylor & Francis Journals, vol. 12(2), pages 125-128.
    8. Patrick J. Wilson & John Okunev, 1999. "Long-Term Dependencies and Long Run non-Periodic Co-Cycles: Real Estate and Stock Markets," Journal of Real Estate Research, American Real Estate Society, vol. 18(2), pages 257-278.
    9. Okunev, John & Wilson, Patrick & Zurbruegg, Ralf, 2000. "The Causal Relationship between Real Estate and Stock Markets," The Journal of Real Estate Finance and Economics, Springer, vol. 21(3), pages 251-261, November.
    10. Ling, Leng & Zhou, Xiaorong & Liang, Quanxi & Song, Pingping & Zeng, Haijian, 2016. "Political connections, overinvestments and firm performance: Evidence from Chinese listed real estate firms," Finance Research Letters, Elsevier, vol. 18(C), pages 328-333.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Liu, Chao & Zheng, Ying & Zhao, Qi & Wang, Chao, 2020. "Financial stability and real estate price fluctuation in China," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 540(C).
    2. Xia, Tongshui & Yao, Chen-Xi & Geng, Jiang-Bo, 2020. "Dynamic and frequency-domain spillover among economic policy uncertainty, stock and housing markets in China," International Review of Financial Analysis, Elsevier, vol. 67(C).
    3. Albulescu, C.T. & Bouri, E. & Tiwari, A.K. & Roubaud, D., 2020. "Quantile causality between banking stock and real estate securities returns in the US," The Quarterly Review of Economics and Finance, Elsevier, vol. 78(C), pages 251-260.
    4. Korhan Gokmenoglu & Siamand Hesami, 2019. "Real estate prices and stock market in Germany: analysis based on hedonic price index," International Journal of Housing Markets and Analysis, Emerald Group Publishing Limited, vol. 12(4), pages 687-707, April.
    5. Al Refai, Hisham & Eissa, Mohamad Abdelaziz & Zeitun, Rami, 2021. "The dynamics of the relationship between real estate and stock markets in an energy-based economy: The case of Qatar," The Journal of Economic Asymmetries, Elsevier, vol. 23(C).
    6. Maria I. Kyriakou & Athanasios Koulakiotis & Apostolos Kiohos & Vassilios Babalos, 2023. "Fractional Integration and Volatility Transmission Between Real Estate and Stock Markets: Novel Evidence from a FIGARCH-BEKK Approach," The Journal of Real Estate Finance and Economics, Springer, vol. 66(4), pages 939-962, May.
    7. Chen, Chien-Fu & Chiang, Shu-hen, 2022. "Portfolio diversification possibilities between the stock and housing markets in G7 countries: Evidence from the time-varying Granger causality," Finance Research Letters, Elsevier, vol. 49(C).

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Korhan Gokmenoglu & Siamand Hesami, 2019. "Real estate prices and stock market in Germany: analysis based on hedonic price index," International Journal of Housing Markets and Analysis, Emerald Group Publishing Limited, vol. 12(4), pages 687-707, April.
    2. Maria I. Kyriakou & Athanasios Koulakiotis & Apostolos Kiohos & Vassilios Babalos, 2023. "Fractional Integration and Volatility Transmission Between Real Estate and Stock Markets: Novel Evidence from a FIGARCH-BEKK Approach," The Journal of Real Estate Finance and Economics, Springer, vol. 66(4), pages 939-962, May.
    3. Albulescu, C.T. & Bouri, E. & Tiwari, A.K. & Roubaud, D., 2020. "Quantile causality between banking stock and real estate securities returns in the US," The Quarterly Review of Economics and Finance, Elsevier, vol. 78(C), pages 251-260.
    4. Li, Xiao-Lin & Chang, Tsangyao & Miller, Stephen M. & Balcilar, Mehmet & Gupta, Rangan, 2015. "The co-movement and causality between the U.S. housing and stock markets in the time and frequency domains," International Review of Economics & Finance, Elsevier, vol. 38(C), pages 220-233.
    5. Tsangyao Chang & Xiao-lin Li & Stephen M. Miller & Mehmet Balcilar & Rangan Gupta, 2013. "The Co-Movement and Causality between the U.S. Real Estate and Stock Markets in the Time and Frequency Domains," Working papers 2013-34, University of Connecticut, Department of Economics.
    6. Imran Yousaf & Shoaib Ali, 2020. "Integration between real estate and stock markets: new evidence from Pakistan," International Journal of Housing Markets and Analysis, Emerald Group Publishing Limited, vol. 13(5), pages 887-900, April.
    7. repec:prg:jnlpep:v:preprint:id:560:p:1-15 is not listed on IDEAS
    8. Kyriakou, Maria I. & Babalos, Vassilios & Kiohos, Apostolos & Koulakiotis, Athanasios, 2020. "Feedback trading strategies and long-term volatility," The Quarterly Review of Economics and Finance, Elsevier, vol. 76(C), pages 181-189.
    9. Kim Liow, 2009. "Long-term Memory in Volatility: Some Evidence from International Securitized Real Estate Markets," The Journal of Real Estate Finance and Economics, Springer, vol. 39(4), pages 415-438, November.
    10. Al Refai, Hisham & Eissa, Mohamad Abdelaziz & Zeitun, Rami, 2021. "The dynamics of the relationship between real estate and stock markets in an energy-based economy: The case of Qatar," The Journal of Economic Asymmetries, Elsevier, vol. 23(C).
    11. Lin, Tsoyu Calvin & Lin, Zong-Han, 2011. "Are stock and real estate markets integrated? An empirical study of six Asian economies," Pacific-Basin Finance Journal, Elsevier, vol. 19(5), pages 571-585, November.
    12. Mato Njavro & Petra Posedel & Maruška Vizek, 2016. "Regime Switching Behaviour of Real Estate and Equity Prices in Emerging Countries," Prague Economic Papers, Prague University of Economics and Business, vol. 2016(4), pages 396-410.
    13. Kim Liow & Kim Ho & Muhammad Ibrahim & Ziwei Chen, 2009. "Correlation and Volatility Dynamics in International Real Estate Securities Markets," The Journal of Real Estate Finance and Economics, Springer, vol. 39(2), pages 202-223, August.
    14. Yuki Toyoshima, 2018. "Testing for Causality-In-Mean and Variance between the UK Housing and Stock Markets," JRFM, MDPI, vol. 11(2), pages 1-10, April.
    15. Dimitrios Gounopoulos & Kyriaki Kosmidou & Dimitrios Kousenidis & Victoria Patsika, 2019. "The investigation of the dynamic linkages between real estate market and stock market in Greece," The European Journal of Finance, Taylor & Francis Journals, vol. 25(7), pages 647-669, May.
    16. Yu-Shao Liu & Chi-Wei Su, 2010. "The relationship between the real estate and stock markets of China: evidence from a nonlinear model," Applied Financial Economics, Taylor & Francis Journals, vol. 20(22), pages 1741-1749.
    17. Chih-Wei SU & Hsu-Ling CHANG & Chun JIANG, 2013. "Does Wealth or Credit Effect Exist in China?," Journal for Economic Forecasting, Institute for Economic Forecasting, vol. 0(3), pages 104-114, October.
    18. Marcin Koltuniak, 2016. "Examination of the directions of spillover effects between the real estate and stock prices in Poland using wavelet analysis," Bank i Kredyt, Narodowy Bank Polski, vol. 47(3), pages 251-266.
    19. Schindler, Felix & Voronkova, Svitlana, 2010. "Linkages between international securitized real estate markets: Further evidence from time-varying and stochastic cointegration," ZEW Discussion Papers 10-051, ZEW - Leibniz Centre for European Economic Research.
    20. Kim Liow & Haishan Yang, 2005. "Long-Term Co-Memories and Short-Run Adjustment: Securitized Real Estate and Stock Markets," The Journal of Real Estate Finance and Economics, Springer, vol. 31(3), pages 283-300, November.
    21. Kim Hiang Liow & Xiaoxia Zhou & Qiang Li & Yuting Huang, 2019. "Time–Scale Relationship between Securitized Real Estate and Local Stock Markets: Some Wavelet Evidence," JRFM, MDPI, vol. 12(1), pages 1-23, January.

    More about this item

    Keywords

    Wealth effect; Fractional integration; Real estate market; Stock market; Portfolio;
    All these keywords.

    JEL classification:

    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • C10 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - General

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:finlet:v:20:y:2017:i:c:p:217-222. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/frl .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.