Volatility spillovers, comovements and contagion in securitized real estate markets

Martin Hoesli, Kustrim Reka

Research output: Contribution to journalArticle

30 Citations (Scopus)

Abstract

This paper analyzes the relationships between local and global securitized real estate markets, but also between securitized real estate and common stock markets. First, the volatility transmissions across markets are examined using an asymmetric t-BEKK (Baba-Engle-Kraft-Kroner) specification of their covariance matrix. Second, correlations from that model and tail dependences estimated using a time-varying copula framework are analyzed to assess whether different dynamics underlie the comovements in the whole distribution and those in the tails. Third, we investigate market contagion by testing for structural changes in the tail dependences. We use data for the U.S., the U.K. and Australia for the period 1990–2010 as a basis for our analyses. Spillover effects are found to be the largest in the U.S., both domestically and internationally. Further, comovements in tail distributions between markets appear to be quite important. We also document different dynamics between the conditional tail dependences and correlations. Finally, we find evidence of market contagion between the U.S. and the U.K. markets following the subprime crisis.
Original languageEnglish
Pages (from-to)1-35
Number of pages35
JournalThe Journal of Real Estate Finance and Economics
Volume47
Issue number1
Early online date21 Sep 2011
DOIs
Publication statusPublished - Jul 2013

Fingerprint

real estate market
market
spillover effect
stock market
real estate
structural change
volatility
Volatility spillover
Securitized real estate markets
Contagion
Comovement
matrix
evidence
Tail dependence

Keywords

  • volatility spillovers
  • financial contagion
  • asymmetric BEKK model
  • copulas
  • structural breaks
  • real estate securities

Cite this

Volatility spillovers, comovements and contagion in securitized real estate markets. / Hoesli, Martin; Reka, Kustrim.

In: The Journal of Real Estate Finance and Economics, Vol. 47, No. 1, 07.2013, p. 1-35.

Research output: Contribution to journalArticle

@article{9bc19f1c70344e10894c8541ef3dc537,
title = "Volatility spillovers, comovements and contagion in securitized real estate markets",
abstract = "This paper analyzes the relationships between local and global securitized real estate markets, but also between securitized real estate and common stock markets. First, the volatility transmissions across markets are examined using an asymmetric t-BEKK (Baba-Engle-Kraft-Kroner) specification of their covariance matrix. Second, correlations from that model and tail dependences estimated using a time-varying copula framework are analyzed to assess whether different dynamics underlie the comovements in the whole distribution and those in the tails. Third, we investigate market contagion by testing for structural changes in the tail dependences. We use data for the U.S., the U.K. and Australia for the period 1990–2010 as a basis for our analyses. Spillover effects are found to be the largest in the U.S., both domestically and internationally. Further, comovements in tail distributions between markets appear to be quite important. We also document different dynamics between the conditional tail dependences and correlations. Finally, we find evidence of market contagion between the U.S. and the U.K. markets following the subprime crisis.",
keywords = "volatility spillovers, financial contagion, asymmetric BEKK model, copulas, structural breaks, real estate securities",
author = "Martin Hoesli and Kustrim Reka",
year = "2013",
month = "7",
doi = "10.1007/s11146-011-9346-8",
language = "English",
volume = "47",
pages = "1--35",
journal = "The Journal of Real Estate Finance and Economics",
issn = "0895-5638",
publisher = "Springer Netherlands",
number = "1",

}

TY - JOUR

T1 - Volatility spillovers, comovements and contagion in securitized real estate markets

AU - Hoesli, Martin

AU - Reka, Kustrim

PY - 2013/7

Y1 - 2013/7

N2 - This paper analyzes the relationships between local and global securitized real estate markets, but also between securitized real estate and common stock markets. First, the volatility transmissions across markets are examined using an asymmetric t-BEKK (Baba-Engle-Kraft-Kroner) specification of their covariance matrix. Second, correlations from that model and tail dependences estimated using a time-varying copula framework are analyzed to assess whether different dynamics underlie the comovements in the whole distribution and those in the tails. Third, we investigate market contagion by testing for structural changes in the tail dependences. We use data for the U.S., the U.K. and Australia for the period 1990–2010 as a basis for our analyses. Spillover effects are found to be the largest in the U.S., both domestically and internationally. Further, comovements in tail distributions between markets appear to be quite important. We also document different dynamics between the conditional tail dependences and correlations. Finally, we find evidence of market contagion between the U.S. and the U.K. markets following the subprime crisis.

AB - This paper analyzes the relationships between local and global securitized real estate markets, but also between securitized real estate and common stock markets. First, the volatility transmissions across markets are examined using an asymmetric t-BEKK (Baba-Engle-Kraft-Kroner) specification of their covariance matrix. Second, correlations from that model and tail dependences estimated using a time-varying copula framework are analyzed to assess whether different dynamics underlie the comovements in the whole distribution and those in the tails. Third, we investigate market contagion by testing for structural changes in the tail dependences. We use data for the U.S., the U.K. and Australia for the period 1990–2010 as a basis for our analyses. Spillover effects are found to be the largest in the U.S., both domestically and internationally. Further, comovements in tail distributions between markets appear to be quite important. We also document different dynamics between the conditional tail dependences and correlations. Finally, we find evidence of market contagion between the U.S. and the U.K. markets following the subprime crisis.

KW - volatility spillovers

KW - financial contagion

KW - asymmetric BEKK model

KW - copulas

KW - structural breaks

KW - real estate securities

U2 - 10.1007/s11146-011-9346-8

DO - 10.1007/s11146-011-9346-8

M3 - Article

VL - 47

SP - 1

EP - 35

JO - The Journal of Real Estate Finance and Economics

JF - The Journal of Real Estate Finance and Economics

SN - 0895-5638

IS - 1

ER -