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Long-Term Structural Price Relationships in Real Estate Markets

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    Abstract

    This study investigates the long-run stochastic properties of real estate assets by geographical breakdown. We also study their linkages with financial assets. The initial tests find that almost all property types exhibit the presence of nonstationarity. Thus, cointegrated methodologies are used. Structural breakpoints identified in the literature are used as a guide to divide the data into two windows, 1983-1989 and 1990-1996. The results show that real estate in the different regions exhibit a closer relationship with each other in the second period, compared with the first. Also, strong linkages between real estate regions and financial assets are noted in the second period. The South is the only region to exhibit segmentation in both periods. Overall, the information derived from our analysis sheds light on linkages among real estate assets and between real estate and financial assets and also provides a framework for creating diversified portfolios.

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    File URL: http://aux.zicklin.baruch.cuny.edu/jrer/papers/pdf/past/vol18n02/v18p335.pdf
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    Bibliographic Info

    Article provided by American Real Estate Society in its journal Journal of Real Estate Research.

    Volume (Year): 18 (1999)
    Issue (Month): 2 ()
    Pages: 335-354

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    Handle: RePEc:jre:issued:v:18:n:2:1999:p:335-354

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    Postal: American Real Estate Society Clemson University School of Business & Behavioral Science Department of Finance 401 Sirrine Hall Clemson, SC 29634-1323
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    Web page: http://www.aresnet.org/

    Order Information:
    Postal: Diane Quarles American Real Estate Society Manager of Member Services Clemson University Box 341323 Clemson, SC 29634-1323
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    Web: http://aux.zicklin.baruch.cuny.edu/jrer/about/get.htm

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    1. Newey, Whitney & West, Kenneth, 2014. "A simple, positive semi-definite, heteroscedasticity and autocorrelation consistent covariance matrix," Applied Econometrics, Publishing House "SINERGIA PRESS", vol. 33(1), pages 125-132.
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    15. Darrat, Ali F & Glascock, John L, 1993. "On the Real Estate Market Efficiency," The Journal of Real Estate Finance and Economics, Springer, vol. 7(1), pages 55-72, July.
    16. Perron,P., 1988. "Testing For A Random Walk: A Simulation Experiment Of Power When The Simpling Interval Is Varied," Papers 336, Princeton, Department of Economics - Econometric Research Program.
    17. George W. Gau & Ko Wang, 1990. "A Further Examination of Appraisal Data and the Potential Bias in Real Estate Return Indexes," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 18(1), pages 40-48.
    18. Chaudhry, Mukesh K & Myer, F C Neil & Webb, James R, 1999. "Stationarity and Cointegration in Systems with Real Estate and Financial Assets," The Journal of Real Estate Finance and Economics, Springer, vol. 18(3), pages 339-49, May.
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    Cited by:
    1. Kim Hiang Liow, 2008. "Financial Crisis and Asian Real Estate Securities Market Interdependence: Some Additional Evidence," Journal of Property Research, Taylor & Francis Journals, vol. 25(2), pages 127-155, November.

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