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This paper aims to investigate the interdependence of daily conditional volatility in seven FTSE‐NAREIT‐EPRA European developed real estate securities markets – the United Kingdom, France, Germany, The Netherlands, Italy, Sweden and Switzerland, from January 1990 to December 2011.

This paper employs the multivariate GARCH and the generalized VAR volatility spillover index methodologies.

The author finds that each of the seven European developed real estate securities markets is relatively endogenous and interacts well with the other markets. In particular, the French real estate securities market has the most dominant volatility impact on other markets over the full sample period. The introduction and implementation of the euro is associated with a moderate increase of the total volatility spillovers around the three‐year (January 1999‐January 2002) period among the sample markets. Moreover, these markets have experienced an increase in their volatility correlation, as well as becoming more open around the GFC period. Around this crisis period, the German real estate securities market emerges as the “volatility leader” in transmitting the conditional volatilities to other markets in the European region.

This is the first paper to examine whether each of the sample European real estate securities markets has influenced or has been more influenced by others from the conditional volatility spillover perspective in the context of economic globalization, monetary integration and financial crisis. Since international investors incorporate into their portfolio selections not only the return correlation structure but also the market volatility interaction, the results of this study can shed light on the extent to which investors can benefit from international real estate securities diversification in the European developed countries.

Index by subjects, compiled by K.G.B. Bakewell covering the following journals: Facilities Volumes 8‐17; Journal of Property Investment & Finance Volumes 8‐17; Property Management Volumes 8‐17; Structural Survey Volumes 8‐17.

Compiled by K.G.B. Bakewell covering the following journals published by MCB University Press: Facilities Volumes 8‐18; Journal of Property Investment & Finance Volumes 8‐18; Property Management Volumes 8‐18; Structural Survey Volumes 8‐18.

Compiled by K.G.B. Bakewell covering the following journals published by MCB University Press: Facilities Volumes 8‐17; Journal of Property Investment & Finance Volumes 8‐17; Property Management Volumes 8‐17; Structural Survey Volumes 8‐17.

Index by subjects, compiled by K.G.B. Bakewell covering the following journals: Facilities Volumes 8‐18; Journal of Property Investment & Finance Volumes 8‐18; Property Management Volumes 8‐18; Structural Survey Volumes 8‐18.

Compiled by K.G.B. Bakewell covering the following journals published by MCB University Press: Facilities Volumes 8‐18; Journal of Property Investment & Finance Volumes 8‐18; Property Management Volumes 8‐18; Structural Survey Volumes 8‐18.

Compiled by K.G.B. Bakewell covering the following journals published by MCB University Press: Facilities Volumes 8‐17; Journal of Property Investment & Finance Volumes 8‐17; Property Management Volumes 8‐17; Structural Survey Volumes 8‐17.

Compiled by K.G.B. Bakewell covering the following journals published by MCB University Press: Facilities Volumes 8‐18; Journal of Property Investment & Finance Volumes 8‐18; Property Management Volumes 8‐18; Structural Survey Volumes 8‐18.

Compiled by K.G.B. Bakewell covering the following journals published by MCB University Press: Facilities Volumes 8‐17; Journal of Property Investment & Finance Volumes 8‐17; Property Management Volumes 8‐17; Structural Survey Volumes 8‐17.

The purpose of this paper is to investigate the time series behavior of co‐movements among 11 European real estate securities markets, with each other as well as between country‐averages, over the sample period from January 1999 to January 2010 by utilizing the asymmetric dynamic conditional correlation (ADCC) technique, long‐memory tests and multiple structural break methodology.

First the ADCC from the multivariate GJR‐GARCH model is used to estimate the pair‐wise conditional correlations between the 11 securitized real estate markets. Then, the 11 country‐average conditional correlation series is subject to a battery of four long‐memory tests to form an “on the balance of evidence” picture; the semi‐parametric Geweke and Porter‐Hudak procedure and Robinson test, as well as the non‐parametric Hurst‐Mandelbrot R/S and Lo's modified R/S tests. Finally, the Bai and Perron's multiple structural break methodology seeks to test whether the average conditional correlations are subject to regime switching via the detection of breaks in the co‐movements of real estate securities returns.

Low to moderate conditional correlations are found for these European real estate securities market and a higher level of correlation in the aftermath of the global financial crisis. The long‐memory correlation effect is present for nine European real estate securities markets. In addition, the conditional correlations are subject to regime switching with two structural breaks in four country‐average correlation series. Across the regimes, a higher level of correlation is linked to a higher level of volatility and a lower level of return, and this happened around the global financial crisis period.

The findings that national real estate securities correlations exhibit time‐varying and asymmetric behavior can help investors understand how real estate securities will co‐move in different market scenarios (e.g. “crisis” and “non‐crisis” times). Moreover, the process of dynamic covariance analysis and forecasting (the ultimate objective in portfolio management) should not rely too much on short‐term autoregressive moving average models. Instead, a combination of some appropriate long‐range dependence models and regime‐switching specifications is needed.

This paper offers useful insights into the time series behavior of average dynamic conditional correlations in European public property markets.