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Price Dynamics in Public and Private Commercial Real Estate Markets

Author

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  • Ying Fan

    (The Hong Kong Polytechnic University)

  • Abdullah Yavas

    (University of Wisconsin-Madison)

Abstract

In this paper, we examine price dynamics, cycles and lead-lag relationships between private and public commercial real estate markets. We utilize wavelet technology to capture both the frequency and the time variations of a time series. We find that the long-run trend of prices in public commercial real estate markets is steeper than that of private commercial real estate markets. In addition, both short-term and long-term cycles are longer in the public market than the private market. We also find that the private market led the public market up until the recession of early 1990s and the public market has led the private market since then. Finally, we offer the first evidence of contagion between the two markets. We find that there is an increase in excess (high frequency) contagion between the two markets during periods of crisis, but not beyond the crises periods. An understanding of co-movements of real estate prices across these two markets is of crucial importance policy makers and for maximizing portfolio diversification benefits and managing risk.

Suggested Citation

  • Ying Fan & Abdullah Yavas, 2023. "Price Dynamics in Public and Private Commercial Real Estate Markets," The Journal of Real Estate Finance and Economics, Springer, vol. 67(1), pages 150-190, July.
    • Handle: RePEc:kap:jrefec:v:67:y:2023:i:1:d:10.1007_s11146-020-09773-6
    DOI: 10.1007/s11146-020-09773-6
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    More about this item

    Keywords

    Commercial real estate prices; Wavelet decomposition; Wavelet coherency; Contagion effect;
    All these keywords.

    JEL classification:

    • E30 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - General (includes Measurement and Data)
    • C53 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Forecasting and Prediction Models; Simulation Methods
    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions

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