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Investigating the change of causality in emerging property markets during the financial tsunami

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  • Hui, Eddie C.M.
  • Chen, Jia
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    Abstract

    In this paper, we employ the multivariate CUSUM (cumulative sum) test for covariance structure as well as the renormalized partial directed coherence (PDC) method to capture the structural causality change of real estate stock indices of five emerging Asian countries and regions (i.e., Thailand, Malaysia, South Korea, PR China, and Taiwan). Meanwhile, we develop a method to make the comparison of renormalized PDC more intuitive and a set of criteria to measure the result. One of our findings indicates that the regional influence of the Chinese real estate stock market on the causality structure of the five markets has arisen under the effect of the financial tsunami.

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    Bibliographic Info

    Article provided by Elsevier in its journal Physica A: Statistical Mechanics and its Applications.

    Volume (Year): 391 (2012)
    Issue (Month): 15 ()
    Pages: 3951-3962

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    Handle: RePEc:eee:phsmap:v:391:y:2012:i:15:p:3951-3962

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    Web page: http://www.journals.elsevier.com/physica-a-statistical-mechpplications/

    Related research

    Keywords: Financial crisis; Emerging real estate stock markets; Multivariate cumulate sum; Renormalized partial directed coherence;

    References

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    1. Shaun Bond & Mardi Dungey & Renée Fry, 2006. "A Web Of Shocks: Crises Across Asian Real Estate Markets," The Journal of Real Estate Finance and Economics, Springer, vol. 32(3), pages 253-274, May.
    2. Edwards, Sebastian & Susmel, Raul, 2001. "Volatility dependence and contagion in emerging equity markets," Journal of Development Economics, Elsevier, vol. 66(2), pages 505-532, December.
    3. Jian Yang & Cheng Hsiao & Qi Li & Zijun Wang, 2005. "The Emerging Market Crisis and Stock Market Linkages: Further Evidence," IEPR Working Papers 05.27, Institute of Economic Policy Research (IEPR).
    4. Eddie Chi Man Hui & Qi Gu, 2009. "Study of guangzhou house price bubble based on state‐space model," International Journal of Strategic Property Management, Taylor & Francis Journals, vol. 13(4), pages 287-298, September.
    5. Carmen M. Reinhart & Kenneth S. Rogoff, 2008. "Is the 2007 US Sub-prime Financial Crisis So Different? An International Historical Comparison," American Economic Review, American Economic Association, vol. 98(2), pages 339-44, May.
    6. Kristin Forbes & Roberto Rigobon, 1999. "No Contagion, Only Interdependence: Measuring Stock Market Co-movements," NBER Working Papers 7267, National Bureau of Economic Research, Inc.
    7. Sanders, Anthony, 2008. "The subprime crisis and its role in the financial crisis," Journal of Housing Economics, Elsevier, vol. 17(4), pages 254-261, December.
    8. Goetzmann, William N. & Jorion, Philippe, 1999. "Re-Emerging Markets," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 34(01), pages 1-32, March.
    9. David Crosthwaite, 2000. "The global construction market: a cross-sectional analysis," Construction Management and Economics, Taylor & Francis Journals, vol. 18(5), pages 619-627.
    10. Granger, C W J, 1969. "Investigating Causal Relations by Econometric Models and Cross-Spectral Methods," Econometrica, Econometric Society, vol. 37(3), pages 424-38, July.
    11. Jarl G. Kallberg & Crocker H. Liu & Paolo Pasquariello, 2002. "Regime Shifts in Asian Equity and Real Estate Markets," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 30(2), pages 263-291.
    12. Foote, Christopher L. & Gerardi, Kristopher & Goette, Lorenz & Willen, Paul S., 2008. "Just the facts: An initial analysis of subprime's role in the housing crisis," Journal of Housing Economics, Elsevier, vol. 17(4), pages 291-305, December.
    13. Quigley, John M., 2002. "Real Estate and the Asian Crisis," Berkeley Program on Housing and Urban Policy, Working Paper Series qt4f4951b0, Berkeley Program on Housing and Urban Policy.
    14. Eddie Chi-Man Hui & Ivan Ng & Otto Muk-Fai Lau, 2011. "Speculative bubbles in mass and luxury properties: an investigation of the Hong Kong residential market," Construction Management and Economics, Taylor & Francis Journals, vol. 29(8), pages 781-793, July.
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