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Real estate as a dynamic risk in the financial sector: New international evidence using wavelet quantile correlation

Author

Listed:
  • Alain Coen
  • Aya Nasreddine
  • Aurelie Desfleurs
  • Yasmine Essafi Zouari

Abstract

This article analyzes the role of real estate risks in the dynamics of financial sector stock returns for a sample of 14 countries: Asia and Oceania (Australia, Hong Kong, Japan, and Singapore), Europe (Belgium, France, Italy, Netherlands, Sweden, Switzerland and the U.K.) and North America (Canada and the USA). Real estate risk measures are drawn from the FTSE/EPRA NAREIT indexes. The period includes the last twenty years running from February 2005 to December 2024 on a daily and a monthly basis. The wavelet quantile correlation (WQC) methodology is implemented to highlight the impact of domestic and U.S. real estate risks. The WQC allows us to deal with time-varying characteristics of time series and to capture tail dependence. Besides, it has the advantage of dissolving the correlation structure between returns across different timescales. Our results report that the response to real estate risk pressures varies significantly depending on the financial sector, the investment horizon, and the origin of the real estate risk. The dynamic dimensions of the domestic and U.S. real estate risks during a long period, marked by significant crises including the Global financial crisis and the COVID-19 pandemic, are heterogeneous in the international financial sector, with potential implications for investment managers and policymakers.

Suggested Citation

  • Alain Coen & Aya Nasreddine & Aurelie Desfleurs & Yasmine Essafi Zouari, 2025. "Real estate as a dynamic risk in the financial sector: New international evidence using wavelet quantile correlation," ERES eres2025_184, European Real Estate Society (ERES).
    • Handle: RePEc:arz:wpaper:eres2025_184
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    JEL classification:

    • R3 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location

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