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Comovements in UK regional property markets: a multivariate cointegration analysis

Andrew C. Worthington (School of Economics and Finance, Queensland University of Technology, Brisbane, Australia, )
Helen Higgs (School of Economics and Finance, Queensland University of Technology, Brisbane, Australia, and)

Journal of Property Investment & Finance

ISSN: 1463-578X

Article publication date: 1 August 2003

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Abstract

This paper examines the short and long‐term comovements among UK regional property markets over the period 1976‐2001. The markets examined are London, Outer South East, East Anglia, South West, East Midlands, West Midlands, Yorkshire and Humberside, North and North West. Multivariate cointegration procedures, Granger non‐causality tests, level VAR and generalised variance decomposition analyses based on error‐correction and vector autoregressive models are conducted to analyse relationships among these markets. The results indicate that there is a stationary, long‐term relationship and a number of long‐term causal linkages between the various UK property markets. In terms of the percentage of variance explained, other regional markets are generally more important than innovations in a given region, though this is not the case for the Outer South East. The Outer South East market is segmented from the other regional markets, though also extremely influential in explaining forecast variance in these markets. The overall suggestion is that opportunities exist for portfolio diversification in the UK regional property market, and the Outer South East market should be seen as containing valuable information for forecasting performance in the regional markets.

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Citation

Worthington, A.C. and Higgs, H. (2003), "Comovements in UK regional property markets: a multivariate cointegration analysis", Journal of Property Investment & Finance, Vol. 21 No. 4, pp. 326-347. https://doi.org/10.1108/14635780310483629

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