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Common Stochastic Volatility in International Real Estate Market

Author

Listed:
  • Mohamadou L. Fadi
  • Yongsheng Wang

    (Washington and Jefferson College, USA)

Abstract

This study examined the real estate markets of Europe, North America, and Asia using daily continental real estate indices. It applied a multivariate stochastic volatility model to analyze the behavior of volatility trends in these markets. The results showed comovements in volatilities, especially between Europe and North America, as indicated by high degrees of correlation of their respective stochastic trend components. However, the impact of this common trend varies in these markets, especially for the early period of the sample. For the later period of the sample, the derived volatility trend indicated volatility convergence among them. It might imply that the role of emerging market such as Asia in diversifying real estate investment risk was not as significant as showed in early studies and is diminishing overtime.

Suggested Citation

  • Mohamadou L. Fadi & Yongsheng Wang, 2014. "Common Stochastic Volatility in International Real Estate Market," Journal of Reviews on Global Economics, Lifescience Global, vol. 3, pages 131-139.
    • Handle: RePEc:lif:jrgelg:v:3:y:2014:p:131-139
    as

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    References listed on IDEAS

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    More about this item

    Keywords

    Real Estate Investment; Volatility; Stochastic Variance;
    All these keywords.

    JEL classification:

    • E30 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - General (includes Measurement and Data)
    • F20 - International Economics - - International Factor Movements and International Business - - - General
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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