Is there really any Contagion among Major Equity and Securitized Real Estate Markets? Analysis from a New Perspective

Hui, Eddie C.M.; Chan, Ka Kwan Kevin

doi:10.1007/s11146-016-9580-1

Cited by 5 publications

(17 citation statements)

References 24 publications

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“…Several studies have investigated the association between real estate and stock markets in the USA (Liow and Yang, 2005;Li et al, 2015;Hui and Chan, 2018;Zheng and Osmer, 2019), UK (Hui et al, 2011;Hui and Chan, 2013;Bouri et al, 2019), Germany (Gokmenoglu and Hesami, 2019); Greece (Gounopoulos et al, 2019), Australia (Lee et al, 2017), China (Zhang and Fung, 2006;Guo and Huang, 2010;Chan and Chang, 2014;Deng et al, 2017;Su et al, 2019), Taiwan (Chen, 2001;Liu and Chen, 2016) and Turkey (Yuksel, 2016;Bayraktar, 2019). However, to the best of our knowledge, no researcher has investigated the real estate and stock nexus in Pakistan.…”

Section: Integration Between Real Estate and Stock Markets 887mentioning

confidence: 99%

Integration between real estate and stock markets: new evidence from Pakistan

Yousaf

Ali

2020

IJHMA

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Purpose This study aims to empirically examine the relationship between real estate and stock market of Pakistan. Design/methodology/approach The data of two real estate indices (house price index and plot price index) are taken for the Pakistan and its four big cities, i.e. Lahore, Karachi, Rawalpindi and Islamabad. It estimates the integration between series by applying the Johansen cointegration test. Moreover, the vector error correction model is applied to examine the short and long-run causal relationships between series. Findings The findings show that the real estate markets are cointegrated with the stock market. They imply that the real estate and stock markets are good substitutes in investment allocation, but investors cannot get the benefit of diversification by making a portfolio of real estate and stock markets in Pakistan. Moreover, the long-run causality is observed from majority house markets to the stock market, whereas short-run causality is evident from majority plot markets to the stock market. Hence, the real estate market leads the stock market in the short run and long run, suggesting the credit-price effect in the majority of real estate markets in Pakistan. These causality results are helpful for investors in the forecasting of real estate and stock markets in Pakistan. Research limitations/implications The limitation of the study is the lower number of observations (107), because house and land prices are only available in monthly frequency from January 2011 in Pakistan. Originality/value To the best of the authors’ knowledge, no researcher has investigated the real estate and stock market nexus in Pakistan. Therefore, this study focuses on examining the relationship between the real estate and stock market of Pakistan. The link between real estate and stock markets will provide useful insights to the portfolio managers, real estate companies, property agents, stockbrokers and investors.

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Section: Integration Between Real Estate and Stock Markets 887mentioning

confidence: 99%

Integration between real estate and stock markets: new evidence from Pakistan

Yousaf

Ali

2020

IJHMA

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“…Stock market shocks contribute to stronger linkages between REITs and stocks, whereby this correlation can lead to price decline in both assets (Hoesli and Reka, 2015;Hui and Chan, 2018;Luchtenberg and Seiler, 2014). Glascock and Lu-Andrews (2018) caused investors to demand a higher return or premium over their investment in REITs (Alcock and Andrlikova, 2017).…”

Section: Literature Reviewmentioning

confidence: 99%

The dynamic role of the Japanese property sector REITs in mixed-assets portfolio

Razak

2023

JPIF

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PurposeThis study examined the dynamic role of the Japanese property sector, particularly the real estate investment trusts (REITs), in mixed-asset portfolios of stocks and bonds, as well as office, retail, hotel and residential REITs.Design/methodology/approachDaily data were retrieved from 01 January 2008 to 31 December 2019. The sample time frame consisted of in-sample and out-of-sample periods. The dynamic conditional correlation-generalised autoregressive conditional heteroskedastic (DCC-GJRGARCH) model was deployed to obtain the forecast estimates of time-varying volatility of REITs and correlations with other assets. The estimates were employed to construct out-of-sample portfolios based on the three assets for daily investment. The five sets of portfolios with each individual property sector REITs, as well as a portfolio of stocks and bonds that served as a benchmark, were produced. The average utility for each set of portfolios was estimated and compared with the average utility of the benchmark portfolio. The average transaction cost (TC) for portfolio rebalancing was calculated as well.FindingsThe forecast of volatility estimates for each property sector revealed that each asset displayed a similar pattern with the differences in the volatility magnitude. Notably, hotel and retail REITs were more volatile than other property sector REITs. The property sector REITs exhibited a positive correlation with stocks but negatively linked with bonds. The results unveiled the diversification benefits of incorporating property sector REITs. The portfolio with property sector REITs had higher risk-adjusted returns and utility, compared to portfolio consisting of stocks and bonds. The benefits outweighed the TC for portfolio rebalancing.Practical implicationsThis study highlights the importance of quantifying the conditional time-varying volatility and correlations of the property sector REITs with other asset returns, especially for investment decision, to select and include property sector REITs in mixed-asset portfolios. For fund managers seeking liquid assets in daily investment, this analysis suggests the inclusion of hotel and retail REITs to enhance REITs' portfolio performance.Originality/valueThis study is the first to investigate the dynamic characteristics of the volatility and correlation of each property sector REITs with other financial assets by employing the conditional framework that accounted for short- and long-run persistency in economic shocks. The reported outcomes shed light on the differences in the underlying properties that contribute to the variances in dynamic volatility of each sector REITs, as well as REITs' correlations with stocks and bonds. This application enables the authors to transmit the dynamics of variance-covariance matrix amongst each property sector REITs, stocks and bonds into asset allocation problem on a daily basis.

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“…Yunus (2012) investigated the dynamic interactions among securitized property markets, stock markets, and key macroeconomic factors for 10 developed nations throughout North America, Europe, Australia, and Asia. Hui and Chan (2018) examined contagion across general equity and securitized real estate markets in China, Hong Kong, and the United States during the Chinese financial crisis. Similar work was done by Hui and Chen (2012) and Hui and Chan (2012, 2013, 2014).…”

Section: Literature Reviewmentioning

confidence: 99%

“…Similar work was done by Hui and Chen (2012) and Hui and Chan (2012, 2013, 2014). Though these studies include multiple financial markets in their analyses, most focus on a specific time period, such as the 1998 financial tsunami, European sovereign debt crisis, or Chinese financial crisis (Hui & Chan, 2012, 2013, 2018). Few consider the long‐term relationship between real estate markets and global financial markets.…”

Section: Literature Reviewmentioning

confidence: 99%

Research on external financial risk measurement of China real estate

2020

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This study applies the method proposed by Diebold and Yilmaz to construct a spillover effect index with which we compare the bilateral information spillover effect and time‐varying characteristics of China's real estate markets to those of representative international financial markets from July 2005 to March 2018 to measure the financial risks in China's real estate markets. The empirical results show the following. (a) There is a significant information spillover effect between China's real estate markets and related stock markets, and China's real estate is in a net information receiving position. (b) After 2016, China's real estate financial risks entered a downward adjustment cycle, and financial risks have gradually declined. These results suggest that Chinese real estate markets' “de‐inventory” has achieved remarkable results and that real estate financial risks have been significantly reduced. However, due to China's limited real estate financial investment channels, the nation's real estate markets should still be cautiously controlled and regulated to respond to potential real estate financial risk.

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Is there really any Contagion among Major Equity and Securitized Real Estate Markets? Analysis from a New Perspective

Cited by 5 publications

References 24 publications

Integration between real estate and stock markets: new evidence from Pakistan

Integration between real estate and stock markets: new evidence from Pakistan

The dynamic role of the Japanese property sector REITs in mixed-assets portfolio

Research on external financial risk measurement of China real estate

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