Search results

1 – 10 of over 14000
To view the access options for this content please click here
Article
Publication date: 26 August 2014

Kim Hiang Liow

The purpose of this paper is to examine weekly dynamic conditional correlations (DCC) and vector autoregressive (VAR)-based volatility spillover effects within the three…

Abstract

Purpose

The purpose of this paper is to examine weekly dynamic conditional correlations (DCC) and vector autoregressive (VAR)-based volatility spillover effects within the three Greater China (GC) public property markets, as well as across the GC property markets, three Asian emerging markets and two developed markets of the USA and Japan over the period from January 1999 through December 2013.

Design/methodology/approach

First, the author employ the DCC methodology proposed by Engle (2002) to examine the time-varying nature in return co-movements among the public property markets. Second, the author appeal to the generalized VAR methodology, variance decomposition and the generalized spillover index of Diebold and Yilmaz (2012) to investigate the volatility spillover effects across the real estate markets. Finally, the spillover framework is able to combine with recent developments in time series econometrics to provide a comprehensive analysis of the dynamic volatility co-movements regionally and globally. The author also examine whether there are volatility spillover regimes, as well as explore the relationship between the volatility spillover cycles and the correlation spillover cycles.

Findings

Results indicate moderate return co-movements and volatility spillover effects within and across the GC region. Cross-market volatility spillovers are bidirectional with the highest spillovers occur during the global financial crisis (GFC) period. Comparatively, the Chinese public property market's volatility is more exogenous and less influenced by other markets. The volatility spillover effects are subject to regime switching with two structural breaks detected for the five sub-groups of markets examined. There is evidence of significant dependence between the volatility spillover cycles across stock and public real estate, due to the presence of unobserved common shocks.

Research limitations/implications

Because international investors incorporate into their portfolio allocation not only the long-term price relationship but also the short-term market volatility interaction and return correlation structure, the results of this study can shed more light on the extent to which investors can benefit from regional and international diversification in the long run and short-term within and across the GC securitized property sector, with Asian emerging market and global developed markets of Japan and USA. Although it is beyond the scope of this paper, it would be interesting to examine how the two co-movement measures (volatility spillovers and correlation spillovers) can be combined in optimal covariance forecasting in global investing that includes stock and public real estate markets.

Originality/value

This is one of very few papers that comprehensively analyze the dynamic return correlations and conditional volatility spillover effects among the three GC public property markets, as well as with their selected emerging and developed partners over the last decade and during the GFC period, which is the main contribution of the study. The specific contribution is to characterize and measure cross-public real estate market volatility transmission in asset pricing through estimates of several conditional “volatility spillover” indices. In this case, a volatility spillover index is defined as share of total return variability in one public real estate market attributable to volatility surprises in another public real estate market.

To view the access options for this content please click here
Article
Publication date: 7 August 2017

Kim Hiang Liow and Shao Yue Angela

The purpose of this paper is to investigate the volatility spectral of five major public real estate markets, namely, the USA, the UK, Japan (JP), Hong Kong (HK), and…

Abstract

Purpose

The purpose of this paper is to investigate the volatility spectral of five major public real estate markets, namely, the USA, the UK, Japan (JP), Hong Kong (HK), and Singapore (SG), during the pre- and post-global financial crisis (GFC) periods.

Design/methodology/approach

First, univariate spectral analysis is concerned with discovering price cycles for the respective real estate markets. Second, bivariate cross-spectral analysis seeks to uncover whether any two real estate price series share common cycles with regard to their relative magnitudes and lead-lag patterns of the cyclical variations. Finally, to test the contagion effects, the authors estimate the exact percentage change in co-spectral density (cyclical covariance) due to high frequencies (short run) after the GFC.

Findings

The authors find that whilst none of the public real estate markets examined are spared from the crisis, the three Asian markets were less severely affected by the GFC and were accompanied by a reversal in volatility increase three years post-global financial crisis. Additionally, the public real estate markets studied have become more cyclically linked in recent years. This is particularly true at longer frequencies. Finally, these increased cyclical co-movements measure the outcomes of contagion and indicate fairly strong contagious effects between the public real estate markets examined due to the crisis.

Research limitations/implications

The implication of this research is that benefits to investors from international real estate diversification may not be as great during the present time compared to previous periods because national public real estate markets have become more correlated. Nevertheless, the findings do not imply the complete absence of diversification benefits. This is because although cyclical correlations increase in the short run, many of the correlation values are still between low and moderate range, indicating that some diversification benefits may still be realized.

Practical implications

Given the significant market share and the highest levels of securitization in Asia-Pacific markets including JP, HK/China, and SG, this cyclical research including major public real estate markets has practical implications for ongoing international real estate investment strategies, particularly for the USA/UK and Asian portfolio managers.

Originality/value

This paper contributes to the limited research on the cyclical return and co-movement dynamics among major public real estate markets during financial/economic crisis in international finance. Moreover, the frequency-domain analysis conducted in this paper adds to better understanding regarding the impact of GFC on the cyclical return volatility and co-movement dynamics of major developed public real estate markets in international investing.

Details

Journal of Property Investment & Finance, vol. 35 no. 5
Type: Research Article
ISSN: 1463-578X

Keywords

To view the access options for this content please click here
Article
Publication date: 8 August 2008

Vladimir Kovac and Stephen Lee

Evaluation of risk/return relationship in public real estate market in the UK is vital for investors. In particular sector risk is being assessed, which is increasingly…

Abstract

Purpose

Evaluation of risk/return relationship in public real estate market in the UK is vital for investors. In particular sector risk is being assessed, which is increasingly important due to expansion of index linked investments. The aim of this paper is to assess the risk inherent in public real estate securities.

Design/methodology/approach

To extract the specific/systematic risk from UK FTSE Real Estate Index (FTSERLT), the single index model (SIM) is employed over the period 1986‐2003. Four benchmark indices are used for this purpose in line with previous studies. The main part of the analyses is to find the index which best distinguishes between the systematic and specific factors affecting the real estate index. Monthly data are collected and grouped into one‐, three‐ and five‐year periods so that short‐ and long‐term trends are better observed and identified.

Findings

The findings show that the link between FTSERLT and all four indices has been declining over the observed period. In addition, it is noticed that the high and irregular specific risk levels in the sector over the last 15‐year period have created some form or “risk cycle”. In case of downturn on the market, it is identified that public real estate is more vulnerable than private market due to its high liquidity. This is identified as a major threat to its long‐term sustainability.

Originality/value

A unique breakdown of specific and systematic risk has been given based on three different duration periods and four benchmark indices. A particular attention has been given to the periods characterized with greater specific risk element. The paper has supported the existence of the “common real estate risk element” between public and private markets by establishing a strong correlation between public and private markets by establishing a strong correlation between the performance of direct real estate monthly market index (IPDMI) and abnormal performance (Alpha) of the public real estate sector.

Details

Journal of Property Investment & Finance, vol. 26 no. 5
Type: Research Article
ISSN: 1463-578X

Keywords

To view the access options for this content please click here
Article
Publication date: 1 August 2016

KimHiang Liow

The purpose of this paper is to investigate the cross-spectra of stock, real estate and bond of ten selected Asian economies in the pre- and post-global financial crisis…

Abstract

Purpose

The purpose of this paper is to investigate the cross-spectra of stock, real estate and bond of ten selected Asian economies in the pre- and post-global financial crisis periods to detect whether there is greater cyclical co-movement post-financial crisis, and whether any observed increased co-movement measures the outcomes of contagion or integration.

Design/methodology/approach

Co-spectral approach is the proper econometric tool to deliver economic insight for this research.

Findings

Results indicate that Asian stock markets, and to a lesser degree, bond and real estate markets are more correlated post-financial crisis. Similarly, Asian financial markets have experienced increased co-movements with the US financial markets post-financial crisis. Moreover, these observed increased co-movements measure the outcomes of contagion in some cases of within-asset and cross-asset classes, as well as for some cross-US-Asian asset factor relationships along the high-frequency components of between two and four weeks. The stock markets are the most contagious, followed by the real estate markets and bond markets.

Research limitations/implications

The results provide short-term investors with additional co-movement information at higher frequencies in order to identify short-term fluctuations of different asset classes. The empirical study also underscores the role of Asian real estate in investment portfolios in a mixed real estate, stock and bond context from a frequency domain perspective.

Practical implications

The practical implication of this research is that benefits to investors from international diversification may not be as great during the present time compared to previous periods because financial/asset market movements have become more correlated. However, it does not imply the complete absence of diversification benefits. This is because although cyclical correlations increase in the short run, many of the values are still between low and moderate range, indicating that some diversification benefits may still be realized.

Originality/value

In advancing the body of knowledge in international financial markets, this research is probably the first study to consider a multi-asset class portfolio context that includes stock, real estate and bond across the ten Asian economies and the USA in a single study. The frequency domain analysis conducted in this paper adds to the understanding of real estate, stock and bond market co-movement, integration and contagion dynamics, as well as the Asian cross-asset factor and US-Asian asset factor relationships in global mixed-investing environment.

Details

Journal of Property Investment & Finance, vol. 34 no. 5
Type: Research Article
ISSN: 1463-578X

Keywords

To view the access options for this content please click here
Article
Publication date: 1 August 2016

Kim Hiang Liow

This research aims to investigate whether and to what extent the co-movements of cross-country business cycles, cross-country stock market cycles and cross-country real

Abstract

Purpose

This research aims to investigate whether and to what extent the co-movements of cross-country business cycles, cross-country stock market cycles and cross-country real estate market cycles are linked across G7 from February 1990 to June 2014.

Design/methodology/approach

The empirical approaches include correlation analysis on Hodrick–Prescott (HP) cycles, HP cycle return spillovers effects using Diebold and Yilmaz’s (2012) spillover index methodology, as well as Croux et al.’s (2001) dynamic correlation and cohesion methodology.

Findings

There are fairly strong cycle-return spillover effects between the cross-country business cycles, cross-country stock market cycles and cross-country real estate market cycles. The interactions among the cross-country business cycles, cross-country stock market cycles and cross-country real estate market cycles in G7 are less positively pronounced or exhibit counter-cyclical behavior at the traditional business cycle (medium-term) frequency band when “pure” stock market cycles are considered.

Research limitations/implications

The research is subject to the usual limitations concerning empirical research.

Practical implications

This study finds that real estate is an important factor in influencing the degree and behavior of the relationship between cross-country business cycles and cross-country stock market cycles in G7. It provides important empirical insights for portfolio investors to understand and forecast the differential benefits and pitfalls of portfolio diversification in the long-, medium- and short-cycle horizons, as well as for research studying the linkages between the real economy and financial sectors.

Originality/value

In adding to the existing body of knowledge concerning economic globalization and financial market interdependence, this study evaluates the linkages between business cycles, stock market cycles and public real estate market cycles cross G7 and adds to the academic real estate literature. Because public real estate market is a subset of stock market, our approach is to use an original stock market index, as well as a “pure” stock market index (with the influence of real estate market removed) to offer additional empirical insights from two key complementary perspectives.

Details

Journal of European Real Estate Research, vol. 9 no. 2
Type: Research Article
ISSN: 1753-9269

Keywords

To view the access options for this content please click here
Article
Publication date: 30 October 2018

Giacomo Morri and Karoline Jostov

This paper aims to investigate the impact of leverage on the total shareholder return of European publicly traded real estate vehicles in three periods: Crisis Period…

Abstract

Purpose

This paper aims to investigate the impact of leverage on the total shareholder return of European publicly traded real estate vehicles in three periods: Crisis Period (2007-2009), Rebound Period (2009-2014) and the Whole Period.

Design/methodology/approach

Cross-sectional analysis is used and the leverage effect on the performance is controlled for seven other independent variables (local market risk premium, size, book-to-market, short-term debt, cash); moreover, regional differences are accounted for.

Findings

It is established that during the Crisis Period, leverage levels are negatively associated with performance: this relationship also holds throughout the Whole Period, implying that for real estate securities, the cost of financial distress is larger than the potential gain from taxation, although the economic significance of it is limited. The Fama and French (1992) three factors, including size, book-to-market and local market risk premium, are found to be relevant, which is consistent with the literature. In addition, the UK and Sweden regions are identified as significant.

Originality/value

Even if there is sizeable body of literature on determinants of leverage and determinants of asset returns, little work has been done on how leverage affects the returns of European real estate companies. In addition, this paper takes advantage of observations from a full economic cycle and the possible effects of the crisis period.

Details

Journal of European Real Estate Research, vol. 11 no. 3
Type: Research Article
ISSN: 1753-9269

Keywords

To view the access options for this content please click here
Article
Publication date: 13 March 2007

Kim Hin (David) Ho

The paper aims to form system dynamics modeling in introduced in conjunction with econometric analysis and planned scenario analysis which will uniquely structure the…

Abstract

Purpose

The paper aims to form system dynamics modeling in introduced in conjunction with econometric analysis and planned scenario analysis which will uniquely structure the process whereby the ex ante capital values of the prime retail real estate sector.

Design/methodology/approach

The integrated system dynamics model investigates the structural factors affecting a unique expectation‐centered capital value (CV) formation of the prime retail real estate sector, through system dynamics modeling, econometric analysis , and the analysis of planned scenarios. This model extends beyond the usual lags and time line aspect of the price discovery process. The retail real estate sector is investigated within the Singapore context, as this sector changes dynamically and non‐linearly in relation to rental, cost and general demand expectations and to exogenous shocks like the Severe Advanced Respiratory Syndrome (SARS) outbreak. These macroeconomic factors are introduced to investigate their impact on retail space CVs through sensitivity analysis, during the simulation period of 20 quarters from the zero reference quarter (2Q2002).

Findings

The paper finds that simulation runs of the expectations‐centered system dynamics model are based on three scenarios. Sensitivity analysis is conducted for each scenario. Optimistic scenarios' CVs are lower than those of the likely scenario, owing to developers forming excessively high expectations that cannot be met by the actual rental levels. Pessimistic scenarios' CVs are highest. Based on bounded logic and the conditions for all scenarios, there are huge differences in expectations resulting in a large disparity in the endogenous CVs. Low actual rents are primarily due to poor informational efficiency, as the prime retail real estate sector is not transparent enough, and that many transactions are privately closed. Expectations cannot be met as the market information is not disseminated extensively through the agents and players. The scenarios clearly highlight the problem of informational non‐availability in the sector. The main policy implication is a need for a more transparent system of sharing rental and pricing information for the retail real estate sector, which is meaningful for real estate developers, investors and urban planners to sustain the retail real estate sector's viability.

Originality/value

This paper takes system dynamics modeling to the next level of incorporating econometric analysis, to estimate the sensitivity of retail rent to cost and the change in retail rent, for effectively structuring the dynamic process whereby the ex ante CVs of the prime retail sector in Singapore are formed and assessed, through a unique and rigorous expectations‐centered system dynamics model of rents, cost, retail stock, general demand and exogenous factors.

Details

Journal of Property Investment & Finance, vol. 25 no. 2
Type: Research Article
ISSN: 1463-578X

Keywords

To view the access options for this content please click here
Article
Publication date: 1 December 2020

James Giannarelli and Piyush Tiwari

This paper examines the extent of the short-run relationship between Australian real estate investment trusts (A-REITs) and direct real estate returns on both a commercial…

Abstract

Purpose

This paper examines the extent of the short-run relationship between Australian real estate investment trusts (A-REITs) and direct real estate returns on both a commercial property sector and a prime and secondary grade basis, i.e. a subsector basis.

Design/methodology/approach

Two-step methodology is used. First, we identify the dynamic interdependencies between A-REITs and each commercial property subsector to determine whether the returns of A-REITs lead each subsector or vice versa. Second, short-run deviations between these asset returns are estimated by measuring their individual response behaviours to changes in key economic and financial market factors that are expected to influence these returns.

Findings

Results suggest that each subsector shares a unique relationship to A-REITs, given each prime and secondary grade commercial property return series varies in behaviour. Some property subsector returns can be predicted by movements in A-REIT returns, whereas returns for others move independent to changes in A-REITs. Similarly, some subsectors commove with A-REITs in response to changes in certain market factors, whereas others diverge. As such, these findings have practical significance to fund managers and portfolio selection, as each commercial subsector embodies its own exposure to A-REITs and vulnerabilities to market forces. Subsectors that commove with A-REITs in response to certain market forces may be used as substitutes in a portfolio. Alternatively, subsectors that diverge from A-REITs in response to market forces may offer diversification benefits when combined.

Practical implications

These findings extend beyond existing research to offer critical decision-making guidance at the acquisition level, as fund managers may more closely consider the impact that prime or secondary grade properties within a given commercial sector may have on a portfolio that consists of public and private Australian real estate. Ultimately, a more informed acquisition may be carried out as consideration of a property's asset grade allows for a deeper insight into the property's risk profile and its anticipated short-run impact on a portfolio.

Originality/value

This paper extends previous studies that focus mostly on aggregate or sector-level returns by measuring REIT and real estate dynamics at the subsector level, allowing for practical significance at not only the portfolio level but crucially at the acquisition level, a pivotal decision-making stage for fund managers. This is also the first paper to study REIT and real estate causality and response patterns to changes in market factors at the Australian sector level.

To view the access options for this content please click here
Article
Publication date: 9 January 2019

KimHiang Liow, Xiaoxia Zhou, Qiang Li and Yuting Huang

The purpose of this paper is to revisit the dynamic linkages between the US and the national securitized real estate markets of each of the nine Asian-Pacific (APAC…

Abstract

Purpose

The purpose of this paper is to revisit the dynamic linkages between the US and the national securitized real estate markets of each of the nine Asian-Pacific (APAC) economies in time-frequency domain.

Design/methodology/approach

Wavelet decomposition via multi-resolution analysis is employed as an empirical methodology to consider time-scale issue in studying the dynamic changes of the US–APAC cross-real estate interdependence.

Findings

The strength and direction of return correlation, return exogeneity, shock impulse response, market connectivity and causality interactions change when specific time-scales are involved. The US market correlates with the APAC markets weakly or moderately in the three investment horizons with increasing strength of lead-lag interdependence in the long-run. Moreover, there are shifts in the net total directional volatility connectivity effects at the five scales among the markets.

Research limitations/implications

Given the focus of the five approaches and associated indicators, the picture that emerges from the empirical results may not completely uniform. However, long-term investors and financial institutions should evaluate the time-scale based dynamics to derive a well-informed portfolio decision.

Practical implications

Future research is needed to ascertain whether the time-frequency findings can be generalizable to the regional and global context. Additional studies are required to identify the factors that contribute to the changes in the global and regional connectivity across the markets over the three investment horizons.

Originality/value

This study has successfully decomposed the various market linkage indicators into scale-dependent sub-components. As such, market integration in the Asia-Pacific real estate markets is a “multi-scale” phenomenon.

To view the access options for this content please click here
Article
Publication date: 26 July 2018

KimHiang Liow and Qing Ye

This paper aims to investigate volatility causality and return contagion on nine international securitized real estate markets by appealing to Markov-switching (MS) regime…

Abstract

Purpose

This paper aims to investigate volatility causality and return contagion on nine international securitized real estate markets by appealing to Markov-switching (MS) regime approach, from July 1992 to June 2014.

Design/methodology/approach

An MS causality interaction model (Psaradakis et al., 2005), an MS vector auto-regression mode (Krolzig, 1997) and a multivariate return contagion model (Dungey et al., 2005) were used to implement the empirical investigations.

Findings

There exist regime shifts in the volatility causality pattern, with the volatility causality effects more pronounced during high volatility periods. During high volatility period, real estate markets’ causality interactions and inter-linkages contribute to strong spillover effect that leads to extreme volatility. However, there is relatively limited return contagion evidence in the securitized real estate markets examined. As such, the US financial crisis might probably be due to cross-market interdependence rather than contagion.

Research limitations/implications

Because international investors incorporate into their portfolio allocation not only the long-run price relationship but also the short-run market volatility connectedness and return correlation structure, the results of this MS causality and contagion study have provided valuable information on the evaluation of regime-dependent securitized real estate market risk, as well as useful guidance on asset allocation and portfolio management decisions for institutional investors.

Practical implications

Financial crisis is one of the key determinants of cross-market volatility interactions. Portfolio managers should be alerted of the observation that the US and the other developed securitized real estate markets are increasingly sharing “common market cycles” in recent years, thereby diminishing the diversification benefits. For policymakers, this research indicates that the volatilities of the US securitized real estate market could be helpful to predict those of other developed markets. It is also important for them to pay attention to those potential risk factors behind the amplified causality, contagion and volatility spillover at times of crisis. Finally, a wider implication for policymakers is to manage the transmission channels through which global stock market return and volatility shocks can affect the local economies and domestic financial markets, including securitized real estate markets.

Originality/value

Real estate investments have emerged to show low correlation with stocks and bonds and contributed to portfolio optimization. With real estate that can serve as a type of consumption commodity and an investment tool, the risk-return profile of real estate is different from that of the underlying stock markets. Therefore, the performance and investment dynamics and real estate-stock link are not theoretically expected to be similar, that requires separate empirical investigations. This paper aims to stand out from the many papers on the same or similar topics in the application of the three MS methodologies to regime-dependent real estate market integration.

Details

Journal of European Real Estate Research, vol. 11 no. 2
Type: Research Article
ISSN: 1753-9269

Keywords

1 – 10 of over 14000