The Journal of Real Estate Finance and Economics

, Volume 39, Issue 2, pp 202–223

Correlation and Volatility Dynamics in International Real Estate Securities Markets

  • Kim Hiang Liow
  • Kim Hin David Ho
  • Muhammad Faishal Ibrahim
  • Ziwei Chen
Article

DOI: 10.1007/s11146-008-9108-4

Cite this article as:
Liow, K.H., Ho, K.H.D., Ibrahim, M.F. et al. J Real Estate Finan Econ (2009) 39: 202. doi:10.1007/s11146-008-9108-4

Abstract

We study international correlation and volatility dynamics of publicly traded real estate securities using monthly returns from 1984 and 2006. We also examine, for comparison, the correlations among the corresponding stock markets. A multivariate dynamic conditional correlation model captures the time-varying correlation within the full period. We confirm lower correlations between all real estate securities market returns than those between the stock market returns themselves. Some significant variations and structural changes in the correlation structure happened within the sample period. We detect a strong and positive connection between real estate securities market correlations and their conditional volatilities. We also find the international correlation structure of real estate securities and the broader stock market are linked to each other. Our results have economic motivations regarding the potential integration of international real estate securities markets and the possibility of including information on changing correlations and volatilities to design more optimal portfolios for international real estate securities.

Keywords

Time-varying correlationVolatilityDynamic conditional correlation modelReal estate securities marketsStock markets

Copyright information

© Springer Science+Business Media, LLC 2008

Authors and Affiliations

  • Kim Hiang Liow
    • 1
  • Kim Hin David Ho
    • 1
  • Muhammad Faishal Ibrahim
    • 1
  • Ziwei Chen
    • 1
  1. 1.Department of Real EstateNational University of SingaporeSingaporeSingapore