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Asymmetric Volatility, Correlation and Returns Dynamics Between the U.S. and U.K. Securitized Real Estate Markets

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Abstract

We construct synchronously priced indices of securitized property listed on the New York Stock Exchange and London Stock Exchange. The indices are then utilized to examine dynamic information flows between the two markets. By analyzing returns behavior, asymmetric volatility spillover effects and exceedance correlations, this study shows that the real estate markets in these two countries experience significant interaction on a daily basis when synchronously priced data are utilized. These results are different from when close-to-close returns are examined, implying that the use of close-to-close data can misconstrue the true dynamics that exist between these markets. Results also show significant asymmetric effects on both the volatility and correlation dynamics between the markets. This has several implications for property portfolio managers, indicating that positive and negative news impact the markets differently. This is particularly true for the United Kindom, where daily foreign news from the United States can influence U.K. volatility.

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  • David Michayluk & Patrick J. Wilson & Ralf Zurbruegg, 2006. "Asymmetric Volatility, Correlation and Returns Dynamics Between the U.S. and U.K. Securitized Real Estate Markets," Published Paper Series 2006-5, Finance Discipline Group, UTS Business School, University of Technology, Sydney.
  • Handle: RePEc:uts:ppaper:2006-5
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    File URL: https://onlinelibrary.wiley.com/doi/abs/10.1111/j.1540-6229.2006.00161.x
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    Cited by:

    1. Kim Hiang Liow & Xiaoxia Zhou & Qiang Li & Yuting Huang, 2019. "Time–Scale Relationship between Securitized Real Estate and Local Stock Markets: Some Wavelet Evidence," Journal of Risk and Financial Management, MDPI, Open Access Journal, vol. 12(1), pages 1-23, January.
    2. He, Chi-Wei & Chang, Kuang-Liang & Wang, Yung-Jang, 2020. "Does the jump risk in the US market matter for Japan and Hong Kong? An investigation on the REIT market," Finance Research Letters, Elsevier, vol. 34(C).
    3. Stelios Bekiros & Amanda Dahlström & Gazi Salah Uddin & Oskar Ege & Ranadeva Jayasekera, 2020. "A tale of two shocks: The dynamics of international real estate markets," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 25(1), pages 3-27, January.
    4. Chang, Kuang-Liang, 2020. "An investigation on mixed housing-cycle structures and asymmetric tail dependences," The North American Journal of Economics and Finance, Elsevier, vol. 51(C).

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