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Shiryaev-Zhou index -- a noble approach to benchmarking and analysis of real estate stocks


  • Eddie C. M. Hui
  • Sheung-Chi Phillip Yam
  • Si-Wei Chen


Real estate markets and real estate stocks are interrelated and are important not only to the investors, but also to the academics. Real estate stocks are, in a sense, good measures of performance of the physical real estate market. The objective of this paper is to provide a preliminary study on gauging the performances of real estate stocks in Hong Kong using the Shiryaev-Zhou index. Evidence shows that the Shiryaev-Zhou index can gauge a real estate stock's performance, good or bad, according to the sign of the Shiryaev-Zhou index. Thus a trading strategy can be formulated as follows: buy a stock if its Shiryaev-Zhou index changes from negative to positive, then hold it until its Shiryaev-Zhou index turns negative, when it is time to sell the stock. We examine the Shiryaev-Zhou indices of the real estate stocks in Hong Kong, and from this we deduce the latest best selling dates of the stocks during the period of our study. The Shiryaev-Zhou index could be an indicator of whether the market is bullish or bearish and consequently tells an investor to hold a stock or not, and it naturally leads to an optimal selling strategy that maximize the average ratio of the selling price to the maximum stock price when the underlying coefficients are assumed to be constant over a definite period of time.

Suggested Citation

  • Eddie C. M. Hui & Sheung-Chi Phillip Yam & Si-Wei Chen, 2011. "Shiryaev-Zhou index -- a noble approach to benchmarking and analysis of real estate stocks," International Journal of Strategic Property Management, Taylor & Francis Journals, vol. 16(2), pages 158-172, September.
  • Handle: RePEc:taf:ijspmg:v:16:y:2011:i:2:p:158-172
    DOI: 10.3846/1648715X.2011.638946

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    References listed on IDEAS

    1. Kim Hiang Liow, 2006. "Dynamic relationship between stock and property markets," Applied Financial Economics, Taylor & Francis Journals, vol. 16(5), pages 371-376.
    2. Daniel C. Quan & Sheridan Titman, 1999. "Do Real Estate Prices and Stock Prices Move Together? An International Analysis," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 27(2), pages 183-207.
    3. Albert Shiryaev & Zuoquan Xu & Xun Yu Zhou, 2008. "Thou shalt buy and hold," Quantitative Finance, Taylor & Francis Journals, vol. 8(8), pages 765-776.
    4. Arjan B. Berkelaar & Roy Kouwenberg & Thierry Post, 2004. "Optimal Portfolio Choice under Loss Aversion," The Review of Economics and Statistics, MIT Press, vol. 86(4), pages 973-987, November.
    5. John Okunev & Patrick J. Wilson, 1997. "Using Nonlinear Tests to Examine Integration Between Real Estate and Stock Markets," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 25(3), pages 487-503.
    6. Albert Shiryaev & Zuoquan Xu & Xun Yu Zhou, 2008. "Response to comment on 'Thou shalt buy and hold'," Quantitative Finance, Taylor & Francis Journals, vol. 8(8), pages 761-762.
    7. Alizadeh, Amir H. & Nomikos, Nikos K., 2007. "Investment timing and trading strategies in the sale and purchase market for ships," Transportation Research Part B: Methodological, Elsevier, vol. 41(1), pages 126-143, January.
    8. Okunev, John & Wilson, Patrick & Zurbruegg, Ralf, 2000. "The Causal Relationship between Real Estate and Stock Markets," The Journal of Real Estate Finance and Economics, Springer, vol. 21(3), pages 251-261, November.
    9. Sing, Tien Foo, 2001. "Dynamics of the Condominium Market in Singapore," International Real Estate Review, Asian Real Estate Society, vol. 4(1), pages 135-158.
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