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Long-Term Structural Price Relationships in Real Estate Markets

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Abstract

This study investigates the long-run stochastic properties of real estate assets by geographical breakdown. We also study their linkages with financial assets. The initial tests find that almost all property types exhibit the presence of nonstationarity. Thus, cointegrated methodologies are used. Structural breakpoints identified in the literature are used as a guide to divide the data into two windows, 1983-1989 and 1990-1996. The results show that real estate in the different regions exhibit a closer relationship with each other in the second period, compared with the first. Also, strong linkages between real estate regions and financial assets are noted in the second period. The South is the only region to exhibit segmentation in both periods. Overall, the information derived from our analysis sheds light on linkages among real estate assets and between real estate and financial assets and also provides a framework for creating diversified portfolios.

Suggested Citation

  • Mukesh K. Chaudhry & Rohan A. Christie-David & William H. Sackley, 1999. "Long-Term Structural Price Relationships in Real Estate Markets," Journal of Real Estate Research, American Real Estate Society, vol. 18(2), pages 335-354.
    • Handle: RePEc:jre:issued:v:18:n:2:1999:p:335-354
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    Cited by:

    1. John G. Gallo & Larry J. Lockwood & Ying Zhang, 2013. "Structuring Global Property Portfolios: A Cointegration Approach," Journal of Real Estate Research, American Real Estate Society, vol. 35(1), pages 53-82.
    2. Kim Hiang Liow, 2008. "Financial Crisis and Asian Real Estate Securities Market Interdependence: Some Additional Evidence," Journal of Property Research, Taylor & Francis Journals, vol. 25(2), pages 127-155, November.
    3. Ying Zhang & Wikrom Prombutr & J. Andrew Hansz, 2024. "Real Estate Portfolio Diversification by Sectors Using a RAL Approach," Journal of Real Estate Portfolio Management, Taylor & Francis Journals, vol. 30(2), pages 121-136, July.
    4. Paul Gallimore & J. Andrew Hansz & Wikrom Prombutr & Ying Zhang, 2014. "Long-term Cointegrative and Short-term Causal Relations among U.S. Real Estate Sectors," International Real Estate Review, Asian Real Estate Society, vol. 17(3), pages 359-394.
    5. John Gallo & Ying Zhang, 2010. "Global Property Market Diversification," The Journal of Real Estate Finance and Economics, Springer, vol. 41(4), pages 458-485, November.
    6. Paul Gallimore & J. Andrew Hansz & Wikrom Prombutr & Ying Zhang, 2014. "Long-term Cointegrative and Short-term Causal Relations among U.S. Real Estate Sectors," International Real Estate Review, Global Social Science Institute, vol. 17(3), pages 359-394.
    7. John Gallo & Larry Lockwood & Ying Zhang, 2013. "Structuring global Property Portfolios: A Cointegration Approach," Journal of Real Estate Research, Taylor & Francis Journals, vol. 35(1), pages 53-82, January.
    8. Nafeesa Yunus & Peggy Swanson, 2007. "Modelling Linkages between US and Asia‐Pacific Securitized Property Markets," Journal of Property Research, Taylor & Francis Journals, vol. 24(2), pages 95-122.
    9. John L. Glascock & Wikrom Prombutr & Ying Zhang & Tingyu Zhou, 2018. "Can Investors Hold More Real Estate? Evidence from Statistical Properties of Listed REIT versus Non-REIT Property Companies in the U.S," The Journal of Real Estate Finance and Economics, Springer, vol. 56(2), pages 274-302, February.
    10. J. Andrew Hansz & Wikrom Prombutr & Ying Zhang & Tingyu Zhou, 2017. "An Anatomy of the Interrelationship between Equity and Mortgage REITs," International Real Estate Review, Global Social Science Institute, vol. 20(3), pages 287-324.

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    • L85 - Industrial Organization - - Industry Studies: Services - - - Real Estate Services

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