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Empirica

, Volume 45, Issue 3, pp 457–487 | Cite as

Regime dependent volatilities and correlation in international securitized real estate markets

  • Kim Hiang Liow
  • Qing Ye
Original Paper
  • 142 Downloads

Abstract

This paper studies the role of regime shifts and time-varying volatilities in market integration in a Markov-switching volatility regime environment among the US, European and Asian developed securitized real estate markets. With a two-state volatility model, the study finds the co-dependence, co-movement and synchronization of volatility regime at the high volatility state are stronger between the US and European securitized real estate markets. Although correlations among the markets are higher in a high volatility regime than in a low volatility regime, there is limited evidence of contagious effects during the high volatility periods between some markets. Moreover, the unsecuritized real estate markets are different from their securitized equivalent in the volatility regime characteristics, correlation pattern and level, as well as the extent of correlation change and contagion effect in high volatility state. Thus, the regime-switching results from stock markets may not be automatically extended to the corresponding public real estate markets, and requires rigorous empirical scrutiny.

Keywords

Volatility regimes Cross-market correlations Securitized real estate markets Bivariate SWARCH model Markov-switching vector autoregressive model 

Notes

Acknowledgements

The first author wishes to acknowledge the funding support given by the Ministry of Education, Singapore, in respect of the research project R-297-000-119-112 to which this paper is related to. The funding agency had no involvement in study design, data collection and analysis, development of results and final preparation of report, as well as decision to submit the article for publication.

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Copyright information

© Springer Science+Business Media New York 2017

Authors and Affiliations

  1. 1.Department of Real EstateNational University of SingaporeSingaporeSingapore

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