The Journal of Real Estate Finance and Economics

, Volume 45, Issue 1, pp 128-151

First online:

Tail Dependence in International Real Estate Securities Markets

  • Jian ZhouAffiliated withReal Estate and Housing, Department of Marketing and Consumer Studies, College of Management and Economics, University of Guelph Email author 
  • , Yanmin GaoAffiliated withSchool of Business, University of Alberta

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“Tail dependence” characterizes the cross market linkages during stressful times. Analyzing tail dependence is of primary interest to portfolio managers who systematically monitor the co-movements of asset markets. However, the relevant literature on real estate securities markets is very thin. Our study extends the literature by using the flexible symmetrized Joe-Clayton (SJC) copula to estimate the tail dependences for six major global markets (U.S., U.K., Japan, Australia, Hong Kong, and Singapore). In implementing the SJC copula, we model the marginal distributions of returns through a semi-parametric method which has never been applied to real estate returns. Our major findings suggest that international markets display different strength and dynamics of tail dependence. We extensively discuss the implications of our findings for financial practices such as portfolio tail diversifications, portfolio selections, portfolio risk management and hedging strategies. Our study also demonstrates that the widely used linear correlation is an inadequate measure of market linkages, especially during periods of crisis.


Tail dependence Symmetrized Joe-Clayton (SJC) copula Portfolio risk management Real estate securities markets