Time-varying correlations between stock and direct real estate returns
Purpose - Understanding correlations between stock and direct real estate returns, which is the key factor that determines diversification benefits in a portfolio, helps formulate and implement better investors' asset allocation and risk management strategies. The past studies find that direct...
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| Veröffentlicht in: | Journal of property investment & finance 2013-03, Vol.31 (2), p.179-195 |
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| creator | Foo Sing, Tien Yao Tan, Zhuang |
| description | Purpose - Understanding correlations between stock and direct real estate returns, which is the key factor that determines diversification benefits in a portfolio, helps formulate and implement better investors' asset allocation and risk management strategies. The past studies find that direct real estate returns have a low unconditionally (long-run) correlation with the returns of equities. However, assuming that such correlation is constant throughout all periods is implausible. The purpose of this study is to test the time-varying correlations of returns between general stocks and direct real estate.Design methodology approach - This study uses the dynamic conditional correlation (DCC) model, which is a simplified version of the multivariate generalised autoregressive conditional heteroskedasticity (GARCH) model, proposed by Engle to test the time-varying correlations between stock and direct real estate returns in six markets, which include the USA, the UK, Ireland, Australia, Hong Kong and Singapore.Findings - The empirical results show significant time-varying effects in the conditional covariance between stock returns and direct real estate returns. The results vary across different real estate sub-sectors, and across different countries. It is observed that the conditional covariance increases in the boom markets, but becomes weaker in the post-crisis periods. The authors observed significant jumps in the conditional covariance between the two asset markets in Singapore and Hong Kong in the post-1977 Asian Financial crisis periods and in the post-2007 US Sub-prime crisis periods.Originality value - The past studies find that direct real estate returns have a low unconditionally (long-run) correlation with the returns of equities. However, assuming that such correlation is constant throughout all periods is implausible. This study fills in the gap by using the dynamic conditional correlation models to allow for time-varying effects in the correlations between stock and real estate returns. |
| doi_str_mv | 10.1108/14635781311302591 |
| format | Article |
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The past studies find that direct real estate returns have a low unconditionally (long-run) correlation with the returns of equities. However, assuming that such correlation is constant throughout all periods is implausible. The purpose of this study is to test the time-varying correlations of returns between general stocks and direct real estate.Design methodology approach - This study uses the dynamic conditional correlation (DCC) model, which is a simplified version of the multivariate generalised autoregressive conditional heteroskedasticity (GARCH) model, proposed by Engle to test the time-varying correlations between stock and direct real estate returns in six markets, which include the USA, the UK, Ireland, Australia, Hong Kong and Singapore.Findings - The empirical results show significant time-varying effects in the conditional covariance between stock returns and direct real estate returns. The results vary across different real estate sub-sectors, and across different countries. It is observed that the conditional covariance increases in the boom markets, but becomes weaker in the post-crisis periods. The authors observed significant jumps in the conditional covariance between the two asset markets in Singapore and Hong Kong in the post-1977 Asian Financial crisis periods and in the post-2007 US Sub-prime crisis periods.Originality value - The past studies find that direct real estate returns have a low unconditionally (long-run) correlation with the returns of equities. However, assuming that such correlation is constant throughout all periods is implausible. This study fills in the gap by using the dynamic conditional correlation models to allow for time-varying effects in the correlations between stock and real estate returns.</description><identifier>ISSN: 1463-578X</identifier><identifier>EISSN: 1470-2002</identifier><identifier>DOI: 10.1108/14635781311302591</identifier><language>eng</language><publisher>Bradford: Emerald Group Publishing Limited</publisher><subject>Asset allocation ; Economic models ; Efficient markets ; Equity ; Hypotheses ; Investment policy ; Investments ; Investors ; Macroeconomics ; Rates of return ; Real estate ; Return on investment ; Standard deviation ; Stochastic models ; Stock exchanges ; Stocks ; Studies ; Time series ; Volatility</subject><ispartof>Journal of property investment & finance, 2013-03, Vol.31 (2), p.179-195</ispartof><rights>Emerald Group Publishing Limited</rights><rights>Copyright Emerald Group Publishing Limited 2013</rights><lds50>peer_reviewed</lds50><woscitedreferencessubscribed>false</woscitedreferencessubscribed><citedby>FETCH-LOGICAL-c382t-e948d0d1b5fbd73fefa58bb657e46d736f174c56d64701b9d9d0e60f326142b3</citedby><cites>FETCH-LOGICAL-c382t-e948d0d1b5fbd73fefa58bb657e46d736f174c56d64701b9d9d0e60f326142b3</cites></display><links><openurl>$$Topenurl_article</openurl><openurlfulltext>$$Topenurlfull_article</openurlfulltext><thumbnail>$$Tsyndetics_thumb_exl</thumbnail><linktopdf>$$Uhttps://www.emerald.com/insight/content/doi/10.1108/14635781311302591/full/pdf$$EPDF$$P50$$Gemerald$$H</linktopdf><linktohtml>$$Uhttps://www.emerald.com/insight/content/doi/10.1108/14635781311302591/full/html$$EHTML$$P50$$Gemerald$$H</linktohtml><link.rule.ids>314,776,780,961,11614,21674,27901,27902,52661,52664,53219,53347</link.rule.ids></links><search><creatorcontrib>Foo Sing, Tien</creatorcontrib><creatorcontrib>Yao Tan, Zhuang</creatorcontrib><title>Time-varying correlations between stock and direct real estate returns</title><title>Journal of property investment & finance</title><description>Purpose - Understanding correlations between stock and direct real estate returns, which is the key factor that determines diversification benefits in a portfolio, helps formulate and implement better investors' asset allocation and risk management strategies. The past studies find that direct real estate returns have a low unconditionally (long-run) correlation with the returns of equities. However, assuming that such correlation is constant throughout all periods is implausible. The purpose of this study is to test the time-varying correlations of returns between general stocks and direct real estate.Design methodology approach - This study uses the dynamic conditional correlation (DCC) model, which is a simplified version of the multivariate generalised autoregressive conditional heteroskedasticity (GARCH) model, proposed by Engle to test the time-varying correlations between stock and direct real estate returns in six markets, which include the USA, the UK, Ireland, Australia, Hong Kong and Singapore.Findings - The empirical results show significant time-varying effects in the conditional covariance between stock returns and direct real estate returns. The results vary across different real estate sub-sectors, and across different countries. It is observed that the conditional covariance increases in the boom markets, but becomes weaker in the post-crisis periods. The authors observed significant jumps in the conditional covariance between the two asset markets in Singapore and Hong Kong in the post-1977 Asian Financial crisis periods and in the post-2007 US Sub-prime crisis periods.Originality value - The past studies find that direct real estate returns have a low unconditionally (long-run) correlation with the returns of equities. However, assuming that such correlation is constant throughout all periods is implausible. This study fills in the gap by using the dynamic conditional correlation models to allow for time-varying effects in the correlations between stock and real estate returns.</description><subject>Asset allocation</subject><subject>Economic models</subject><subject>Efficient markets</subject><subject>Equity</subject><subject>Hypotheses</subject><subject>Investment policy</subject><subject>Investments</subject><subject>Investors</subject><subject>Macroeconomics</subject><subject>Rates of return</subject><subject>Real estate</subject><subject>Return on investment</subject><subject>Standard deviation</subject><subject>Stochastic models</subject><subject>Stock exchanges</subject><subject>Stocks</subject><subject>Studies</subject><subject>Time series</subject><subject>Volatility</subject><issn>1463-578X</issn><issn>1470-2002</issn><fulltext>true</fulltext><rsrctype>article</rsrctype><creationdate>2013</creationdate><recordtype>article</recordtype><sourceid>BENPR</sourceid><recordid>eNqNUMFKAzEUDKJgrX6At4BXV_OSTXb3KMVWoeClB28h2bzI1u1uTVLFvzelnhTB0xseM-_NDCGXwG4AWH0LpRKyqkEACMZlA0dkAmXFCs4YP95jJYpMeD4lZzGuGWNSKTUh81W3weLdhM9ueKHtGAL2JnXjEKnF9IE40JjG9pWawVHXBWwTDWh6ijGZhBmnXRjiOTnxpo948T2nZDW_X80eiuXT4nF2tyxaUfNUYFPWjjmw0ltXCY_eyNpaJSssVV4oD1XZSuVUtg62cY1jqJgXXEHJrZiSq8PZbRjfdtmCXo_5ff6o97HrhkNTZRYcWG0YYwzo9TZ0mxxRA9P7tvSvtrKGHTS4wWB69y_J9R-Sn1S9dV58AavXeBM</recordid><startdate>201303</startdate><enddate>201303</enddate><creator>Foo Sing, Tien</creator><creator>Yao Tan, Zhuang</creator><general>Emerald Group Publishing Limited</general><scope>AAYXX</scope><scope>CITATION</scope><scope>0U~</scope><scope>1-H</scope><scope>7WY</scope><scope>7WZ</scope><scope>7XB</scope><scope>AFKRA</scope><scope>BENPR</scope><scope>BEZIV</scope><scope>CCPQU</scope><scope>DWQXO</scope><scope>F~G</scope><scope>K6~</scope><scope>L.-</scope><scope>L.0</scope><scope>M0C</scope><scope>PQBIZ</scope><scope>PQEST</scope><scope>PQQKQ</scope><scope>PQUKI</scope><scope>Q9U</scope></search><sort><creationdate>201303</creationdate><title>Time-varying correlations between stock and direct real estate returns</title><author>Foo Sing, Tien ; Yao Tan, Zhuang</author></sort><facets><frbrtype>5</frbrtype><frbrgroupid>cdi_FETCH-LOGICAL-c382t-e948d0d1b5fbd73fefa58bb657e46d736f174c56d64701b9d9d0e60f326142b3</frbrgroupid><rsrctype>articles</rsrctype><prefilter>articles</prefilter><language>eng</language><creationdate>2013</creationdate><topic>Asset allocation</topic><topic>Economic models</topic><topic>Efficient markets</topic><topic>Equity</topic><topic>Hypotheses</topic><topic>Investment policy</topic><topic>Investments</topic><topic>Investors</topic><topic>Macroeconomics</topic><topic>Rates of return</topic><topic>Real estate</topic><topic>Return on investment</topic><topic>Standard deviation</topic><topic>Stochastic models</topic><topic>Stock exchanges</topic><topic>Stocks</topic><topic>Studies</topic><topic>Time series</topic><topic>Volatility</topic><toplevel>peer_reviewed</toplevel><toplevel>online_resources</toplevel><creatorcontrib>Foo Sing, Tien</creatorcontrib><creatorcontrib>Yao Tan, Zhuang</creatorcontrib><collection>CrossRef</collection><collection>Global News & ABI/Inform Professional</collection><collection>Trade PRO</collection><collection>ABI/INFORM Collection</collection><collection>ABI/INFORM Global (PDF only)</collection><collection>ProQuest Central (purchase pre-March 2016)</collection><collection>ProQuest Central UK/Ireland</collection><collection>ProQuest Central</collection><collection>Business Premium Collection</collection><collection>ProQuest One Community College</collection><collection>ProQuest Central Korea</collection><collection>ABI/INFORM Global (Corporate)</collection><collection>ProQuest Business Collection</collection><collection>ABI/INFORM Professional Advanced</collection><collection>ABI/INFORM Professional Standard</collection><collection>ABI/INFORM Global</collection><collection>ProQuest One Business</collection><collection>ProQuest One Academic Eastern Edition (DO NOT USE)</collection><collection>ProQuest One Academic</collection><collection>ProQuest One Academic UKI Edition</collection><collection>ProQuest Central Basic</collection><jtitle>Journal of property investment & finance</jtitle></facets><delivery><delcategory>Remote Search Resource</delcategory><fulltext>fulltext</fulltext></delivery><addata><au>Foo Sing, Tien</au><au>Yao Tan, Zhuang</au><format>journal</format><genre>article</genre><ristype>JOUR</ristype><atitle>Time-varying correlations between stock and direct real estate returns</atitle><jtitle>Journal of property investment & finance</jtitle><date>2013-03</date><risdate>2013</risdate><volume>31</volume><issue>2</issue><spage>179</spage><epage>195</epage><pages>179-195</pages><issn>1463-578X</issn><eissn>1470-2002</eissn><abstract>Purpose - Understanding correlations between stock and direct real estate returns, which is the key factor that determines diversification benefits in a portfolio, helps formulate and implement better investors' asset allocation and risk management strategies. The past studies find that direct real estate returns have a low unconditionally (long-run) correlation with the returns of equities. However, assuming that such correlation is constant throughout all periods is implausible. The purpose of this study is to test the time-varying correlations of returns between general stocks and direct real estate.Design methodology approach - This study uses the dynamic conditional correlation (DCC) model, which is a simplified version of the multivariate generalised autoregressive conditional heteroskedasticity (GARCH) model, proposed by Engle to test the time-varying correlations between stock and direct real estate returns in six markets, which include the USA, the UK, Ireland, Australia, Hong Kong and Singapore.Findings - The empirical results show significant time-varying effects in the conditional covariance between stock returns and direct real estate returns. The results vary across different real estate sub-sectors, and across different countries. It is observed that the conditional covariance increases in the boom markets, but becomes weaker in the post-crisis periods. The authors observed significant jumps in the conditional covariance between the two asset markets in Singapore and Hong Kong in the post-1977 Asian Financial crisis periods and in the post-2007 US Sub-prime crisis periods.Originality value - The past studies find that direct real estate returns have a low unconditionally (long-run) correlation with the returns of equities. However, assuming that such correlation is constant throughout all periods is implausible. This study fills in the gap by using the dynamic conditional correlation models to allow for time-varying effects in the correlations between stock and real estate returns.</abstract><cop>Bradford</cop><pub>Emerald Group Publishing Limited</pub><doi>10.1108/14635781311302591</doi><tpages>17</tpages></addata></record> |
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| source | Emerald Journals; Standard: Emerald eJournal Premier Collection |
| subjects | Asset allocation Economic models Efficient markets Equity Hypotheses Investment policy Investments Investors Macroeconomics Rates of return Real estate Return on investment Standard deviation Stochastic models Stock exchanges Stocks Studies Time series Volatility |
| title | Time-varying correlations between stock and direct real estate returns |
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