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An assessment of the relationship between public real estate markets and stock markets at the local, regional, and global levels

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  • Liow, Kim Hiang
  • Schindler, Felix

Abstract

The primary contribution of this study is to assess whether public real estate markets and stock markets are linked at the local, regional, and global levels, and to assess the evolution of their dynamic relationship and gradual integration during the last two decades. For individual pairs of real estate and stock markets, our analysis shows that the current levels of local, regional, and global correlation between real estate and stock markets are time-varying and are, at most, moderate at the respective integration levels. The real estate and stock markets are both contemporaneously and causally linked in their returns and volatilities; however the causality relationship appears weaker. In the long run, the real estate markets have slowly become more integrated with the global and regional stock markets; while less integrated with the local stock markets. In addition, the extracted common factors allow for a direct assessment of the dynamic relationships between the real estate and stock markets as a group, and thereby complement the individual results. Finally, there appears to be a declining real estate and stock return dispersion and differential at the local, regional, and global levels for all nine economies, indicating a tendency of return convergence between real estate and stock market in an international environment.

Suggested Citation

  • Liow, Kim Hiang & Schindler, Felix, 2011. "An assessment of the relationship between public real estate markets and stock markets at the local, regional, and global levels," ZEW Discussion Papers 11-056, ZEW - Leibniz Centre for European Economic Research.
    • Handle: RePEc:zbw:zewdip:11056
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    Cited by:

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    2. Liow, Kim Hiang & Huang, Yuting & Song, Jeonseop, 2019. "Relationship between the United States housing and stock markets: Some evidence from wavelet analysis," The North American Journal of Economics and Finance, Elsevier, vol. 50(C).
    3. Mário Nuno Mata & Muhammad Najib Razali & Sónia R. Bentes & Isabel Vieira, 2021. "Volatility Spillover Effect of Pan-Asia’s Property Portfolio Markets," Mathematics, MDPI, vol. 9(12), pages 1-20, June.
    4. Kim Hiang LIOW & Jeongseop SONG, 2019. "Market Integration Among the US and Asian Real Estate Investment Trusts in Crisis Times," International Real Estate Review, Global Social Science Institute, vol. 22(4), pages 463-512.
    5. Imran Yousaf & Shoaib Ali, 2020. "Integration between real estate and stock markets: new evidence from Pakistan," International Journal of Housing Markets and Analysis, Emerald Group Publishing Limited, vol. 13(5), pages 887-900, April.
    6. Yuming Li & Jing Yang, 2020. "Momentum Strategies with Home Price Indices and Stocks," International Real Estate Review, Global Social Science Institute, vol. 23(2), pages 861-892.
    7. Korhan Gokmenoglu & Siamand Hesami, 2019. "Real estate prices and stock market in Germany: analysis based on hedonic price index," International Journal of Housing Markets and Analysis, Emerald Group Publishing Limited, vol. 12(4), pages 687-707, April.
    8. S.Aydin Yuksel & Asli Yuksel & Umit Erol & Hakki Ozturk, 2017. "The Impact of the Global Financial Crisis on the Co-Integration Relationship between Reit and Stock Markets: A Dynamic Co-Integration Approach," International Journal of Economics and Finance, Canadian Center of Science and Education, vol. 9(7), pages 86-98, July.
    9. Yuming Li & Jing Yang, 2020. "Momentum Strategies with Home Price Indices and Stocks," International Real Estate Review, Global Social Science Institute, vol. 23(2), pages 235-266.
    10. Akinsomi, Omokolade & Coskun, Yener & Gil-Alana, Luis A. & Yaya, OlaOluwa S, 2018. "Is there convergence between the BRICS and International REIT Markets?," MPRA Paper 88756, University Library of Munich, Germany.

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    More about this item

    Keywords

    Time-Varying Integration; Return and Volatility Causality; Multivariate Asymmetric DCC-GARCH; Return Convergence; Securitized Real Estate Markets; International Stock Markets;
    All these keywords.

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • G31 - Financial Economics - - Corporate Finance and Governance - - - Capital Budgeting; Fixed Investment and Inventory Studies

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