Structuring global Property Portfolios: A Cointegration Approach

Gallo, John G.; Lockwood, Larry J.; Zhang, Ying

doi:10.1080/10835547.2013.12091356

Cited by 14 publications

(11 citation statements)

References 38 publications

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“…None of these three categories analyze the linkage between national securitized real estate markets and regional or global stock markets, and often also neglect linkages between local real estate markets and those of other regions which is a key topic for investors. Gallo et al (2013) also state that there are no linkages between regions which is in contrast to the findings below.…”

Section: Relevant Literaturecontrasting

confidence: 54%

“…The other markets do not add much further diversification benefits. This is mainly equivalent to the interpretation of the findings from the classical (weak) exogeneity tests in the cointegration framework as conducted, for e.g., by Gallo et al (2013).…”

Section: Causality-in-mean and Causality-in-variance Analysismentioning

confidence: 76%

“…3. Cointegration between national securitized real estate markets (see for e.g., Gallo et al (2013), Schindler and Voronkova (2010), and Yunus (2009) among others).…”

Section: Relevant Literaturementioning

confidence: 99%

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International Real Estate Review

Liow¹,

Schindler²

2014

IRER

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The primary contribution of this study is to comprehensively assess whether public real estate and stock markets are linked at the local, regional, and global levels, and assess the evolution of their dynamic relationship and gradual integration during the last two decades. For individual pairs of real estate and stock markets, our analysis shows that the current levels of local, regional, and global correlations between real estate and stock markets are time-varying, and at most, moderate at the respective integration levels. The real estate and stock markets are both contemporaneously and causally linked in their returns and volatilities; however, the causality relationship appears weaker. In the long run, the real estate markets have slowly become more integrated with the global and regional stock markets, while less integrated with the local stock markets. In addition, the extracted common factors allow for a direct assessment of the dynamic relationships between the real estate and stock markets as a group, and thereby complement the individual results. Finally, there appears to be a declining real estate and stock return dispersion and differential at the local, regional, and global levels for all nine economies studied in this research work, which indicate a tendency of return convergence between real estate and stock markets in the international environment.

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Section: Relevant Literaturecontrasting

confidence: 54%

Section: Causality-in-mean and Causality-in-variance Analysismentioning

confidence: 76%

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International Real Estate Review

Liow¹,

Schindler²

2014

IRER

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“…When transaction costs were accounted for, the Markov switching strategy was still superior in two out of three portfolios. Gallo et al (2013) created globally diversified real estate portfolios using cointegration methods Evidence from Asian real estate markets over 1992-2009. Their model portfolio outperformed the mean-variance optimized portfolio by nearly 600 basis points annually.…”

Section: Introductionmentioning

confidence: 99%

Shall we buy and hold? Evidence from Asian real estate markets

Hui

Yam

Wright

et al. 2014

Journal of Property Investment &Amp; Finance

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Purpose -The purpose of this study is to verify whether the trading strategy can beat the "buy-and-hold" strategy for the securitized real estate indices of six Asian economies: Hong Kong, China, Japan, Taiwan, Thailand and Malaysia. Design/methodology/approach -This paper constructs a trading strategy from the Shiryaev-Zhou index and tests the strategy on the securitized real estate indices of six emerging Asian economies: Hong Kong, China, Japan, Taiwan, Thailand and Malaysia. The authors compare the resulting profits from using the trading strategy with the resulting profits from using the "buy-and-hold" strategy. The authors consider three cases: no transaction costs, 0.1 percent transaction costs, and 0.2 percent transaction costs. Findings -The results show that the trading strategy the authors constructed generally outperforms the "buy-and-hold" strategy even in the presence of transaction costs. In particular, the authors have a new finding as follows: Thailand and Malaysia's securitized real estate indices fell drastically during the period of observation. However, applying the trading strategy to these two securitized real estate indices can still earn a profit. Practical implications -The trading strategy is particularly useful in protecting investors from huge loss in adverse market conditions. The results can be applied to the field of finance/investment that investors can construct a trading strategy similar to the authors to earn more profits. Originality/value -This study will consider cases where both buying and selling costs exist, so the scenario is more like stock transactions in real-life equity markets. Furthermore, in this paper, for each securitized real estate index, the authors plot a graph to show the holding and non-holding periods under the trading strategy. This would help the authors explain the resulting profit under the trading strategy. This kind of graphical analysis was neglected by Hui and Yam.

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“…There has been a recent research interest in the integration and cointegration of global real estate markets and international real estate portfolio diversification by Yunus andSwanson (2007, 2013), Glascock and Kelly (2007), Yunus (2009), Gallo and Zhang (2010), and Gallo, Lockwood, and Zhang (2013). The resulting extension of knowledge in these areas has been facilitated in particular by two developments.…”

Section: Introductionmentioning

confidence: 99%

International Real Estate Review

Gallimore¹,

Hansz²,

Prombutr³

et al. 2014

IRER

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We investigate long-term cointegrative and short-term causal relations among seven U.S. sectoral REITs. First, cointegration tests identify one long-term cointegrative relation among five of the sectors, which suggests that two of the sectors are outside the cointegrative space. Second, short-term Granger causality tests identify three leading and two following cointegrated sectors. Third, a proposed vector autoregressive model indicates that a stronger cointegrating effect is induced by declining real estate markets and a multivariate sensitivity regression model shows that unexpected inflation significantly and negatively influences the cointegrative disequilibrium. Lastly, our cointegration-based portfolio performance analyses show that the inferior performance of the all-sector market portfolio stems from containing the redundant cointegrated sectors which shatter portfolio diversification.

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Structuring global Property Portfolios: A Cointegration Approach

Cited by 14 publications

References 38 publications

International Real Estate Review

International Real Estate Review

Shall we buy and hold? Evidence from Asian real estate markets

International Real Estate Review

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