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The Causal Relationship between Real Estate and Stock Markets

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Author Info

  • Okunev, John
  • Wilson, Patrick
  • Zurbruegg, Ralf

Abstract

This paper examines the dynamic relationship that exists between the US real estate and S&P 500 stock markets between the years of 1972 to 1998. This is achieved by conducting both linear and nonlinear causality tests. The results from these tests provide a number of interesting observations that primarily show linear relationships to be spuriously affected by structural shifts that are inherent within the data. Linear test results generally show a unidirectional relationship to exist from the real estate market to the stock market. However, these results are not consistent with financial theory and for all sub-samples of the data. In contrast, the nonlinear causality test shows a strong unidirectional relationship running from the stock market to the real estate market, and is consistent in the presence of any structural breaks. Copyright 2000 by Kluwer Academic Publishers

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Bibliographic Info

Article provided by Springer in its journal Journal of Real Estate Finance & Economics.

Volume (Year): 21 (2000)
Issue (Month): 3 (November)
Pages: 251-61

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Handle: RePEc:kap:jrefec:v:21:y:2000:i:3:p:251-61

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Web page: http://www.springerlink.com/link.asp?id=102945

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Cited by:
  1. Hao Fang & Yen-Hsien Lee, 2013. "Are the Global REIT Markets Efficient by a New Approach?," Panoeconomicus, Savez ekonomista Vojvodine, Novi Sad, Serbia, vol. 60(6), pages 743-757, December.
  2. Diks, Cees & Panchenko, Valentyn, 2006. "A new statistic and practical guidelines for nonparametric Granger causality testing," Journal of Economic Dynamics and Control, Elsevier, vol. 30(9-10), pages 1647-1669.
  3. 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.
  4. Jian Zhou & Zhixin Kang, 2011. "A Comparison of Alternative Forecast Models of REIT Volatility," The Journal of Real Estate Finance and Economics, Springer, vol. 42(3), pages 275-294, April.
  5. 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.
  6. Anita CEH CASNI & Maruska VIZEK, 2014. "Interactions between Real Estate and Equity Markets: an Investigation of Linkages in Developed and Emerging Countries," Czech Journal of Economics and Finance (Finance a uver), Charles University Prague, Faculty of Social Sciences, vol. 64(2), pages 100-119, March.
  7. 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 201365, University of Pretoria, Department of Economics.
  8. 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.
  9. Kim, J.W. & Leatham, D.J. & Bessler, D.A., 2007. "REITs' dynamics under structural change with unknown break points," Journal of Housing Economics, Elsevier, vol. 16(1), pages 37-58, March.
  10. Jinliang Li & Robert M. Mooradian & Shiawee X. Yang, 2009. "The Information Content of the NCREIF Index," Journal of Real Estate Research, American Real Estate Society, vol. 31(1), pages 93-116.
  11. James Payne & George Waters, 2007. "Have Equity REITs Experienced Periodically Collapsing Bubbles?," The Journal of Real Estate Finance and Economics, Springer, vol. 34(2), pages 207-224, February.
  12. Kim Hiang Liow & Felix Schindler, 2014. "An Assessment of the Relationship between Public Real Estate and Stock Markets at the Local, Regional, and Global Levels," International Real Estate Review, Asian Real Estate Society, vol. 17(2), pages 157-202.
  13. Signori, Ombretta & Brière, Marie, 2012. "Inflation-Hedging Portfolios : Economic Regimes Matter," Economics Papers from University Paris Dauphine 123456789/9296, Paris Dauphine University.
  14. Oikarinen, Elias, 2006. "Price Linkages between Stock, Bond and Housing Markets - Evidence from Finnish Data," Discussion Papers 1004, The Research Institute of the Finnish Economy.
  15. 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.
  16. Kim Hiang Liow & James R. Webb, 2008. "Nonlinear Return Dependence in Major Real Estate Markets," Journal of Property Research, Taylor & Francis Journals, vol. 25(4), pages 285-319, December.

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