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How integrated are real estate markets with the world market? Evidence from case-wise bootstrap analysis

  • Hatemi-J, Abdulnasser
  • Roca, Eduardo
  • Al-Shayeb, Abdulrahman

We investigate the extent by which real estate markets are integrated with the world market. We apply a case-wise bootstrap analysis — a method that is robust to non-normality and increased volatility that characterises financial markets, especially during periods of distress. We also take into account the effect of the global financial crisis. Our investigation is conducted in relation to five most important and highly internationalised real estate markets, namely, the US, UK, Japan, Australia and the United Arab Emirates (UAE). We find that the first four markets are integrated with the world market — with Japan, the US, and the UK being the most integrated, but the last one is not. Our results also show that the US real estate market crisis affected the five markets differently. It made the UAE, Australia and the US real estate markets more integrated internationally but resulted in the Japanese market becoming less globally integrated. In the case of the UK, the crisis did not affect at all its level of integration with the world market.

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Article provided by Elsevier in its journal Economic Modelling.

Volume (Year): 37 (2014)
Issue (Month): C ()
Pages: 137-142

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Handle: RePEc:eee:ecmode:v:37:y:2014:i:c:p:137-142
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/30411

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  1. Ling, David C & Naranjo, Andy, 2002. "Commercial Real Estate Return Performance: A Cross-Country Analysis," The Journal of Real Estate Finance and Economics, Springer, vol. 24(1-2), pages 119-42, Jan.-Marc.
  2. Shaun Bond & Mardi Dungey & Renée Fry, 2006. "A Web Of Shocks: Crises Across Asian Real Estate Markets," The Journal of Real Estate Finance and Economics, Springer, vol. 32(3), pages 253-274, May.
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  8. Kim Hiang Liow, 2006. "The Dynamics of Return Volatilty and Systematic Risk in International Real Estate Security Markets," Journal of Property Research, Taylor & Francis Journals, vol. 24(1), pages 1-29, November.
  9. Nathaniel Frank & Heiko Hesse, 2009. "Financial Spillovers to Emerging Markets During the Global Financial Crisis," IMF Working Papers 09/104, International Monetary Fund.
  10. Bond, Shaun A & Patel, Kanak, 2003. "The Conditional Distribution of Real Estate Returns: Are Higher Moments Time Varying?," The Journal of Real Estate Finance and Economics, Springer, vol. 26(2-3), pages 319-39, March-May.
  11. Perron, P, 1988. "The Great Crash, The Oil Price Shock And The Unit Root Hypothesis," Papers 338, Princeton, Department of Economics - Econometric Research Program.
  12. Hwang, Soosung, 2004. "Liquidity Risk and Real Estate: A Quantitative Approach to Assessing Risk," ERES eres2004_540, European Real Estate Society (ERES).
  13. Serena Ng & Pierre Perron, 1997. "Lag Length Selection and the Construction of Unit Root Tests with Good Size and Power," Boston College Working Papers in Economics 369, Boston College Department of Economics, revised 01 Sep 2000.
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