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Interactions between Real Estate and Equity Markets: an Investigation of Linkages in Developed and Emerging Countries

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  • Anita CEH CASNI

    (University of Zagreb, Faculty of Economics and Business, Zagreb, Croatia)

  • Maruska VIZEK

    () (Institute of Economics Zagreb and Zagreb School of Economics and Management, Zagreb, Croatia)

Abstract

This study analyzes the long-run cointegration relationship between equity and real estate prices in 30 developed and emerging economies divided into four subpanels related to the income level and the financial market structure. We test for cointegration between equity and real estate prices using the pooled mean group estimator of the dynamic heterogeneous panel on the entire panel sample and on subpanels in order to isolate the variation of codependencies among country groups. The results suggest equity prices and real estate prices are closely correlated, synchronized and codependent, with the degree of codependencies depending on the income levels and the structure of the financial markets of the given countries. In economies with a market-based financial system and in developed economies, the reaction of both asset prices to economic news is more synchronized when compared to the remaining two groups. The stock market crash and the global financial crisis significantly increased the level of segmentation between the stock markets and the real estate markets, with the segmentation being more pronounced in developed economies.

Suggested Citation

  • 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.
  • Handle: RePEc:fau:fauart:v:64:y:2014:i:2:p:100-119
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. William Mingyan Cheung & James Chicheong Lei & Desmond Tsang, 2016. "Does Property Transaction Matter in the Price Discovery of Real Estate Markets?," International Real Estate Review, Asian Real Estate Society, vol. 19(1), pages 27-49.
    2. repec:eme:ijhmap:ijhma-05-2016-0037 is not listed on IDEAS
    3. repec:prg:jnlpep:v:preprint:id:560:p:1-15 is not listed on IDEAS
    4. Mingyan Cheung & Chicheong Lei, 2014. "Does Property Transaction Matter in Price Discovery in Real Estate Markets? Evidence from International Firm Level Data," ERES eres2014_195, European Real Estate Society (ERES).
    5. repec:vrs:crebss:v:2:y:2016:i:2:p:30-40:n:3 is not listed on IDEAS
    6. repec:vrs:ngooec:v:62:y:2016:i:4:p:23-32:n:3 is not listed on IDEAS
    7. repec:ibn:ijefaa:v:9:y:2017:i:7:p:86-98 is not listed on IDEAS

    More about this item

    Keywords

    real estate market; stock market; integration; segmentation;

    JEL classification:

    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models
    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • R31 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Housing Supply and Markets

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